So you think it is better than the one from DBi?
Has higher volatility and has a lot of holdings (almost 100, which is a lot for for mf, and especially the ones available to us), so is better diversified.
Also had lower correlation to equities historically.
The dbi one is also really good, but as itâs a SG cta replication fund, so will not have as high of a volatility.
I do plan to own both though, at 10% each.
And for someone only owning one, the dbi one is probably preferable, due to the replication nature.
But depends on the portfolio strategy and how big you size MF.
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Maybe of interest to some:
The Managed Futures Ecosystem:
The Rise of the Managed Futures ETF
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It should be very attractive.
Thatâs basically the main reason (for me, others may want to only hold ucits funds for various reasons) to hold them compared to the US etf.
Nice bonus is that we can access ASFYXâ program that way, that would otherwise be unaccessible, due to being an US mutual fund.
Ictax has shown to classify lots of short term cap gains distributions (and income distributions), of the 60/40 long term /short term cap gains distributions from US futures funds as taxable. The ucits mutual funds have none of those, as that is US tax code specific.
All the ucits MF funds I check had very low taxable income, and as far as I can tell only the interest on the collateral is taxed.
KMLM is a kind of special case. It escaped any taxation so far. Iâm not sure if this will hold in the future.
DBMF was terrible from a taxation perspective. You can check how much of the distributions were considered taxable income, it was quite a lot.
For the Alpha Simplex fund: On the fund page it says they target a vol. of 17% or less. Same as ASFYX. Which is really attractive.
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Another introductory article
https://www.morningstar.com/funds/managed-futures-open-new-frontier-etfs
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thanks for sharing this. very informative!
what I understand is that Managed Futures make sense if the time horizon is relatively short under 10 years but for longer period, simple diversified equity ETFs will always outperform.
I get the risk adjusted return but for someone who has a time horizon of 20 years would adding such a product not lead to a drag down of the overall portfolio ?
Maybe I am naive, it seems like the underlying instruments are the same (Equity, Bonds, Commodities). Instead of buying them, the fund uses futures contracts to build portfolio. And then they apply short or long strategies using different tactics (where they pretend to know more than everyone else and hence can outperform by timing the changes)
Two questions
- So this essentially comes down to Trading. When 90% of traders lose money, why 90% of futures traders do any different?
- Why is it called an alternative asset class when it is using same underlying instruments? Just by making a group of them makes it a different asset class or it is nothing different than portfolio management.
In my view, this is just a fancy name of outsourcing the Asset Allocation strategy and then timing the market. First one being useful but second one being not very reliable. Sounds like a hedge fund without calling it a hedge fund.
I think because Index funds beat active funds in almost all asset classes, now the main way to make money is to talk about what is the right and best asset allocation at different times. Investment banking always figure out a way to make money 
P.S -: I have to confess though - Asset allocation (for personal risk tolerance and current market situation for various assets) is not so simple even if we exclude timing. So having suggestions on asset allocation from hedge funds might be valuable. Only thing i know is 60-40, 100% stocks, Target date strategies or Ray Dalio approach. Asset allocation for beginners
Where do you have this number? Do you maybe mean active stock funds that underperform the market? then yes probabaly, but certainly not 90% LOSE money, as in negative return.
We also have decades worth of live fund data for these strategies as well, and 90% certainly did not lose money.
Also whatâs your benchmark? 100% stocks? That would be the wrong benchmark.
Youâd need to benchmark against a portfolio comprised of stocks/bonds/currencies/commodities.
Then you did not understand what the strategies involved here are supposed to do. Itâs to create a uncorrelated diversifiying return stream, not to beat the (stock) market. The benefit then comes mainly in stock bear market environments and via rebalancing.
This is only really true for stocks. Active bond stragies for example regularly beat bond indices.
Because it can be long-short, very flexible and incorporates assset classes like currencies/coommodities, that you would normally not have in your portoflio. And by using futures they apply leverage so you have substantial effects from these allocations with not much capital involved. Itâs also alternative because it has been very uncorrelated historically to the traditional long-only assets clases.
I think where you have the wrong impression, is that you compare this to an active stock picking strategy.
Managed futures rely on systematic trading strategies that are based on quantitative models which identify trends systemtically/algorithmically and trade them accordingly. With the use of leverage (implied in the futures) that then levers up strong trends, in contrast the fundamental analysis used in traditional asset classes.
And that happens without any feelings or a mangerâs active opinion on it. Itâs the trend alogrithm behind it. You should however diversify your trend allocation, to not be depended on one. Or use funds that replicate the whole space like an index (SG trend/cta index replication funds like from DBI)
Also in general: If you donât use leverage, this is more for the more conservative investor. If you are not leveraged and would be otherwise 100% stocks, adding managed futures/trend following is unlikely to beat 100% stocks.
However if you normally had say a 60/40% stocks/bonds portfolio, doing something like 50% stocks 30% bonds 20% managed futures, is likely to increase your returns with lower risk and help you sustain a higher withdrawal rate as well.
Now if you arenât adverse to using leverage, you could add managed futures ON TOP of your already 100% stocks. This is likely to increase your total return, without increasing your risk much, due to the low correlation. And as you are already 100% stocks, the only thing this added portion needs to do, for you to come ahead, is to beat the interest on your margin or the implied interest of the leveraged fund you use.
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Actually my comment is based on what I have heard multiple times on many channels or blogs. I donât know if there is really any study which shows this or not. I have seen various numbers from 70-90%.
I am not talking about underperforming the benchmark. I am talking about actual losses. There is a recent publication by Indian SEBI which states 71% of traders lost money during financial year 2022-2023
Just to be clear. When I say Asset allocation strategy, I did not mean only stocks. I mean what portion should be in stocks, what portion in bonds etc. And this is what dynamic asset allocation strategy does.
For example , letâs say, I start with 100% stocks. And now the market seems quite expensive, I change to 70% stocks 20% bonds and 10% gold, then in few months I change again.
Isnât this what a dynamic asset allocation hedge fund would do?
Managed Futures is only doing this via futures instead of actually buying the underlying assets.
Which was a bear market, everyone lost money basically.
But interestingly 2022 was one of the best years for manage futures: Many funds made +30% in that year, while the S&P lost something like 30%.
Also your link talks about âindividual intraday tradersâ. This is something completely different.
I think I know where the confusion stems from. This is basically all talking about retail intra-day traders using derivatives etc.
It really has not much in common with what we are talking about. And yes those numbers are true. But nobody here talks about average Joe intra-day tradersâŠ
Depends on the hedge fund. Hedge funds have a huuge range in how they operate.
Managed futures trend following fund also dont make judgements such as âmarket seems expensiveâ. They look at price trends (time-series momentum) and nothing more.
Also they have set risk budgets from the start. For example 1/4 each risk budget (meaning volatility contribution essentially) for stocks/bonds/currencies/commodities.
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Thanks for correction.
First of all. Thanks for your patience.
I am not really disputing that these instruments work or not.
I am trying to understand what exactly they do. And if I understand correctly, they decide at any given point of time what should be the best asset allocation (stocks, bonds, gold, commodities, etc) and change it based on their research.
How they execute this is not a concern. They can simply buy the underlying instruments or buy future contracts. Maybe future contracts is more efficient. Itâs alright
If my understanding is correct then to do so, these funds need to be able to predict very well how each of these asset classes would perform. Normally on this forum, we always say that future is uncertain, so timing the market is not good idea.Based on what you said, it seems like they are able to do so. Okay they are not predicting but following some trend related algo. But still itâs technical analysis in the end.
This means that over a 20 year period, they should be able to outperform some traditional set and forget strategies like or their benchmarks
- 60 /40
- Ray dalio all weather
- Whatever benchmark they use
This is why I was asking so many questions.
But it seems you are saying , they are not designed to beat any set and forget asset allocation strategies. They are simply designed to reduce volatility to an existing portfolio without reducing return.
Right?
Personal view -: I still feel that these funds are trying to time the market, they might not use valuation as a metric and perhaps use Trend. They have good back test results but we also should debate the principle they use to make their decision.
Is there any research available to show if âtrend followingâ is a reliable factor in long term investing?
By the way, after reading all of this, I am a bit more motivated to read a bit more about asset allocation beyond stocks, Real estate and bonds.
Perhaps this is the next step in rookie investor journey
Is there anything else to what is listed below? -:
Managed futures
Private equity
Commodities
Precious metals
Hedge funds
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Pretty much. They are designed as components to add to existing portfolios, to further diversify them.
And to add here: Think more like this with my example from above: Use these portfolios as a start and your base portfolio, then reduce the allocation and replace with managed futures.
Kind of agree here. Definitely fully agree on the debating of their principles.
Not market timing in the traditional sense though Which I also disapprove.
There certainly is, donât have it on hand right now, but if I come around I will look something up for you
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The AQR research paper was posted up-thread:
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As iMGP - DBi Managed Futures Fund (the UCITS fund) has their 2023 annual report out and ICTax also lists its 2023 tax data for the R USD share class, we can take a look at how that played out.
| Amount | Currency | |
|---|---|---|
| Annual report | ||
| Net asset value | 74â470â135.26 | USD |
| Net income / (loss) from investments | 1â983â865.90 | USD |
| Ratio | 2.664% | |
| ICTax | ||
| Tax value | 117.56 | CHF |
| Taxable income | 3.129 | CHF |
| Ratio | 2.662% |
Looks alright. The net income also doesnât include returns from derivatives and security sales. Though, they where mostly negative for the period.
What I found strange, was that I found no mention of their commodity allocation (neither as derivatives, nor under securities). What I saw are two strange bonds called ARIES CAPITAL LIMITED, and GREENLEAVES CAPITAL. But I donât think thatâs it.
@Tony1337, could you have a look, and confirm that Iâm not blind? I might go and ask DBi how this works, I heard they are quite responsive.
I havent seen their actual holdings either.
You just have the allocation and percentages in the fact sheet. But not the actual instruments.
Maybe they donât have to publish them.
On the bonds: Also seem rather weird. These are two corporate bonds it seems. Maybe from the banks that manage the fund or something?
Btw AUM growth seems rapid. Last time I looked a few months ago, it was only at 100m, now 150m already.
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Btw on the topic of taxation:
Here on DBMF for example 2022: ICTax - Income & Capital Taxes
It has the short term capital gains distribution classified as taxable, but as itâs cap gains no withholding tax so a (Z) behind.
Here it says it was 0.4279$ of short term cap gains. The long term cap gains were tax free in ictax.
https://newsfile.futunn.com/public/NN-PersistNoticeAttachment/7781/20230720/OCC/OCC_51670_51670.pdf#:~:text=iMGP%20DBi%20Managed%20Futures%20Strategy%20ETF%20(DBMF)%20has%20announced%20a,date%20is%20December%2030%2C%202022.
Now could we go to them and complain about that or is it legally correct to tax them?
What would you consider a reasonable portfolio allocation in accumulation phase of managed futures, assuming an investment of currently 90% VT and 10% residential real estate fund?
I guess if too low it dosnt really matter. Higher allocation though may ne a performance drag?
Allocate at all of still ~20y before retirement?