Managed Futures: Your Hedge in Unpredictable Markets
With the fluctuation of markets in recent years, diversification has become more crucial than ever. And in the pursuit of diversification, one strategy stands out — Managed Futures.
These rapid responders have shown their mettle not just in crisis but beyond, demonstrating their value as an effective hedge against volatility.
Market Volatility and Managed Futures: An Unusual Duo
In the wake of unprecedented market volatility in the last few years, investors have started to look beyond traditional assets like stocks and bonds.
They need investments that can weather the storm and managed futures have been a beacon in this regard.
The beauty of managed futures lies in their non-correlation to equities and bonds. Rather than being tied to the predictions of how assets should perform, managed futures are grounded in reality — they invest in how assets are trading.
This reality-based investing lets them take both long and short positions on a variety of asset classes.
Fast Movers in a Crisis
In a crisis, speed matters.
Managed futures are quick off the mark, investing based on actual asset class trends rather than hazy, long-term forecasts.
They're the epitome of adaptability, capable of changing their positions swiftly in response to market fluctuations.
In fact, a study has shown that managed futures hedge fund strategies can pivot their positions in an average of just 15 days during a crisis.
This rapid response is invaluable in chaotic markets, offering investors a lifeline when many other strategies are floundering.
A Hedge for a Changing World
Andrew Beer, co-founder of Dynamic Beta Investments, sees managed futures as a potent safeguard against a rapidly changing world. The iMGP DBi Managed Futures Strategy ETF DBMF 0.00%↑ , under his stewardship, raked in over $1 billion in Assets Under Management (AUM) last year.
This investor confidence attests to the power of managed futures as a hedge.
Amidst a rapidly evolving global landscape, having a strategy that can adapt swiftly and effectively is a priceless advantage.
The DBMF is an actively managed fund that primarily uses long and short positions within derivatives, most of which are futures contracts, along with forward contracts.
These contracts span a variety of asset classes, including domestic equities, fixed income, currencies, and commodities.
The fund is not just about innovative strategies but also about affordability.
With a management fee of just 0.85%, the DBMF offers a cost-effective avenue for investors to explore the potential of managed futures.
Observe the dynamic of DBMF 0.00%↑ (blue line) and SPY 0.00%↑ (orange line) during the Bear Market of 2022. While the SPY 0.00%↑ that follows the S&P500 fell 20.28%, the DBMF 0.00%↑ increased 9.09% proving be a crisis asset alternative on our dynamic portfolio.
Managed futures aren't just a tool for crisis management.
They're also a valuable addition to any long-term portfolio.
Their rapid response capability, along with their ability to mitigate potential losses and volatility in market dislocations, makes them a viable strategy for long-term growth.
Moreover, the performance potential of managed futures is even more significant when incorporated into the ETF wrapper.
This combination presents an innovative solution for investors seeking to balance risk and reward in unpredictable markets.
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