economy
As stocks and bonds fall, and oil hits $100, a futures trade that boomed in 2022 may again be a winner
Managed futures, which track macro themes expected to play out over months, do well when traditional assets are falling. This could be one of those times.
TL;DR
- Managed future strategies are gaining renewed investor attention due to market pressures on stocks and bonds.
- These strategies use systematic models to trade futures contracts across various asset classes, aiming to capture broader trends.
- In 2022, managed futures strategies saw a 20% gain while the S&P 500 fell 18% and the U.S. Aggregate Bond Index dropped 13%.
- The approach is well-suited for volatile market conditions with uncertainty around inflation, interest rates, and geopolitical events.
- Managed futures ETFs offer greater accessibility to a strategy historically associated with hedge funds.
- Major asset managers like BlackRock, Invesco, and Fidelity are launching their own managed futures ETFs, indicating significant investor demand.
- Investors need to understand the complexity of managed futures ETFs and be prepared for inevitable periods of underperformance.
- A recommended allocation for managed futures strategies is 3% to 5% of an overall portfolio for diversification.