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Managed Futures Funds Would Not Have Protected You

BenWPBenWP
in Fund Discussions
I watch from the sidelines several managed futures and alternative strategies, but hold only REMIX and PGAEX. For what it is worth, the following three managed futures strategies crashed along with the market in the past few days; namely, CTA, DBMF, and PQTAX. In my limited experience, these funds have produced gains on days when equities have crashed. Not so during this SVB crisis. In fact, the two ETFs are up smartly today with the rally in stocks.

Comments

  • Baseball_Fan
    @BenWP

    Fair point you make from where I'm sitting. Reminds me of what kudlow said a while back about all the quant etc funds. "they all work until they don't when you need them to" or something close to that

    I do hold but likely going to sell out of blndx and fortx. Maybe these guys models read the trend right in energy and bonds going down the last few years and backwards looking spiffy but those trend reversal moments are hard to digest as you refer to. Not sure how they'll perform going forward. Please don't even mention mafix. Ouch

    I'm going to take those monies and put it into more pmefx and maybe tsumx. Really like the fund manager cippolini at Penn. Working class guy who went to Drexel after junior college. Rhymes with my background.

    Ymmv. Good luck to you and good health to you and yours

    Baseball fan
  • BenWPBenWP
    Thanks for your reply, @Baseball_Fan. I should have included KMLM, 2022’s star, to the list. Seems as though nothing will hold your pants up if market gravity snips your suspenders.
  • AndyJ
    Most managed futures funds are trend followers; if there are any lasting trends (like earlier in 2022) they can work. If the assets they cover are bouncing around like mad, there's no way they can work.
  • BenWPBenWP
    I have read that about those funds, @AndyJ. I wonder what the difference is between momentum investing and following trends, or simply trying to outfox the markets by guessing directions of certain assets. Must be the secret sauce they use. No one gave me the recipe nor did I ask for it.
  • Sven
    It seems to boil down to similar strategies but with fancy names, managed futures. Certainly they are not “all weather” funds/ETF. Often they have ridiculous high expense ratio too.
  • Baseball_Fan
    Good marketing though, no?

    Isn't that what most of us are after. The perfect find...kind of like prwcx? Not sure if I meant to be sarcastic or I guess you could argue that's as good a fund as is out there

  • AndyJ
    edited March 2023
    @BenWP, dunno if there's either a distinction or a difference between trend following and momentum investing. M* calls the OEF category "systematic trend," and from the bit of studying them I've done it looks like they each have their own specific approach, but that's what they're doing.

    PQTAX and AMFAX were the reason I was flat in 2022 instead of down several percent. But once the "trend" of so many assets getting whacked nearly uniformly faded, they weren't worth holding anymore.
  • LewisBraham
    edited March 2023
    AndyJ is right about trend following. Managed futures funds have trouble adjusting during inflection points when trends suddenly shift. One thing I wonder if the smartest managers aren't doing is adjusting the duration of their signals. Markets move more quickly in either direction today than I imagine twenty or thirty years ago, so it might not be worth following the market leaders for instance in the past year but rather the past three months or even shorter. Makes it trickier to tell what is a real signal and what is just a head fake.
  • yogibearbullyogibearbull
    Momentum funds (OEFs, ETFs) mostly deal with stocks.

    Managed-futures funds are into various markets - stocks, bonds, commodities, currencies.

    In theory, there is a trend somewhere, up or down.

    But the reality is that managers can be (i) wrong on trends, (ii) wrong on both long and short sides, and (iii) sometimes, the futures diverge a lot from the underlying stuff (so one could get the trend right but still lose in futures).
  • Devo
    +1
  • BenWPBenWP
    Somewhat after the fact, but the linked SA article confirms what others have said here about why managed futures cannot reliably preserve a portfolio from a sudden downturn.

    https://seekingalpha.com/article/4588263-dbmf-driving-through-rearview-mirror?mailingid=30880849&messageid=etf_daily&serial=30880849.77760&utm_campaign=ETF+Ideas+2023-03-18&utm_content=etf_daily_control&utm_medium=email&utm_source=seeking_alpha&utm_term=ETF+Daily
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