1st at Morningstar = 144th in the Real World

361 Capital has a press release out announcing its 361 Managed Futures Strategy mutual fund (AMFZX / AMFQX) was rated the top-performing mutual fund in its category by Morningstar for the 12 months ending June 30, 2013.  Congratulations to them, they are surely doing something better than the rest of Morningstar’s “Managed Futures” category (quotations meaning the heavy use of sarcasm) – but we can’t help but think this is a little like being the cleanest dirty shirt. We’re the curious sort, so we couldn’t help but wonder where their 8.12% return over those 12 months would rank amongst the 784 programs in our database and against our recommended list.

As it turns out, that #1 ranking would put them all the way down to 144th place when looking at all programs (but still in the top 20% of all programs), and below a third of our recommended list. Now, we know this is a little bit of an apples to oranges comparison (after all, those managers above 361 charge the full 2 and 20 fee structure, which is just impossible quite possible to overcome), and to be fair, they weren’t implying they were #1 across the whole managed futures universe, stating clearly it was just in the Morningstar managed futures category.

So while congratulations may be in order, there are just two little problems we see –

1. There’s more to being successful than just last year’s returns – a true ranking needs to consider the risk as well.

2. This is a counter-trend strategy which operates on U.S. stock indices only; meaning – it likely won’t provide the crisis period returns one might expect from a ‘managed futures’ fund during a market crash. Indeed, being counter-trend, we would expect it to suffer losses during a crisis period where stock indices see extended down moves.

The takeaway – be careful out there. 361 may fit in great with what you are trying to do in your portfolio; but if it’s in your portfolio because of the name ‘managed futures’, make sure you understand exactly how it will and won’t correlate to managed futures in a market crisis.

Write a Comment

The performance data displayed herein is compiled from various sources, including BarclayHedge, RCM's own estimates of performance based on account managed by advisors on its books, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.

Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history.

Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.

Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.

Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.

RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.

See the full terms of use and risk disclaimer here.