It’s been over a year since we last dedicated a newsletter to the so-called managed futures mutual fund/ETF, and we thought it was high time we revisited the subject. Our last piece looked at the big name fund operators in the field– namely, the Wisdom Tree Managed Futures ETF (WDTI) and Rydex Managed Futures Fund (RYMFX)- arguing that these products were misnamed and did not give investors the type of managed futures exposure they were likely after when investing. While their performance then and to date has continued to be lackluster and well below managed futures as an asset class, it doesn’t seem to have hurt the popularity of the idea, with several smaller players now joining the fray to the tune of 19 such funds now clamoring after investor’s managed futures money. Hey, Morningstar even made them a fund category (anyone out there still arguing against their being an asset class?).
We found ourselves scratching our heads. Just why is so much money pouring into these so-called managed futures mutual funds when they have done very little in the way of performance? Part of the answer is the classic line from the brokerage side of Wall Street which says stocks (insert ETFs, mutual funds, mortgage backed securities, etc.) are sold, not bought- meaning that money is pouring into these products because that’s what the army of advisers (they don’t really call themselves stock brokers anymore) around the world are pitching to their clients, not the other way around.
But that begs the question… Why are these funds being sold so heartily? Part of that answer has to do with high fees for selling them, part of it is because people are still skeptical of stocks, and part of it is because managed futures is still a good story (boiled down in one line to – hey, it performed in 2008- even if past performance is not necessarily indicative of future results).
And that answer begs another question, do these advisors really know what they are selling (a recent blog posts says no) when it comes to managed futures exposure? Are the investors in so-called managed futures mutual funds really understanding what they are getting?
Well, we’re going to do our part to make sure those investors do know what they are getting, with an in-depth look at these products, and, unfortunately for the product managers, our research into the full universe of these publically traded products unearthed even more levels of complexity than we saw previously.
The performance data displayed herein is compiled from various sources, including BarclayHedge, 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.