Managed Futures

As a byproduct I found this nice interview with Andrew Beer, the guy behind DBMF ETF. He talks about:

  • What makes managed futures different from other strategies
  • Why trade only 10 contracts
  • Why they are top-down (replicating allocations) only, as opposed to bottom-up (replicating strategies).
  • Shortcomings of their approach

Transcript on rcmalternatives.com.

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How do you invest? Directly or with some kind of brokerage?

Swissquote (SQ), IIRC they use UBS’ fund desk. You save on comms if you invest directly. However, it is important to me that my relatives could just pick up the phone and call SQ in case something would happen to me.

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Mind you sharing what kind of funds?

I‘m still kind of puzzled how it can be tax free

Apols, I double checked a fund I don’t hold, which seems to have tax: ICTax - Income & Capital Taxes

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Yes, net monthly data back to inception. Management fees, performance fees, minimums, AUMs, etc. Over 300 active and 1500 archived funds. You can graph a portfolio from your choice of individual funds. Thank you!

Yes, please note that not all funds report to IASG.

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True, DBi’s Managed Futures Strategy is not on there, but it is on rcmalternatives.com. They also have similar features as iasg.com.

OK. Give me the elevator pitch:

Q1. What are managed futures?
Q2. Why should I invest in them?
Q3. What are the benefits?
Q4. What are the risks?

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ChatGPT is in another window.

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Ok, I’ll try:

Managed futures is a collection of strategies trading futures contracts. They also come in all kinds of legal structures. In this thread we often talked about the “systematic trend-following” strategy: Go long if prices have gone up, go short if they have gone down.

  • There is significant long-term evidence of good returns across all kinds of asset classes for this strategy. The returns had low to negative correlation to stocks, especially during crisis.
  • As they can go short, they can and do generate returns if everything goes down.
  • The fees have come down a lot, and (or as) solid index replicators have entered the market.

Allocating a part of a stock portfolio should have better risk adjusted returns (better than just adding bonds). This can be also be used for leverage, of which you need less because they can pull their own weight.

  • The premium for trend-following could disappear fully, or at least be low for a longer period (look at the 2010s).
  • Buying the wrong fund. It’s a bit like stock-picking, the manager and their strategy matters. We agree that MSCI stock market weight is a rather sound methodology. Passively implementing it reduces manager risk. But the alternative funds space has not fully developed this feature.
  • The track-record of the replicators is not that long. Other replication approaches have failed before.
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