Andrew Beer, Managing Member, DBi, LLC, joined Keith Black, Managing Director of RIA Channel, to discuss replicating managed futures hedge funds in a low-cost ETF strategy.
DBi seeks to replicate hedge funds at low cost with simple exposures. The firm’s strategies seek to understand the risks and exposures of private hedge funds and copy those exposures into simpler portfolios. The firm’s strategies are available as ETFs regardless of the investor’s net worth. Hedge fund replication strategies can be compared to index funds, which have lower fees and active exposure than actively managed funds.
Beer notes that managed futures may be the most compelling way to diversify portfolios, as it is one of the few hedge fund strategies with minimal return correlation to stocks and bonds. Historically, managed futures strategies have outperformed in times of weak stock and bond markets, such as the strategy’s average return of 20% in 2022. Managed futures may work when it feels like diversification isn’t working. Managed futures funds typically implement a trend-following strategy that takes long positions in markets that are trending higher and short positions in markets that are trending lower.
Managed futures have been in institutional portfolios for 50 years but are newly available in the ETF space. The iMGP DBi Managed Futures Strategy ETF (DBMF) is one of the largest funds in the managed futures ETF category that manages just $2 billion.
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