It’s been almost a year since we expanded our look at managed futures mutual funds to consider the new entrants into the space, and now we have a year’s worth of data to test our hypothesis that these funds would, in aggregate, underperform the broader managed futures indices. So far, we’ve been right, with the average managed futures mutual fund returning -9.42% after load fees (and -5.09% before load fees), compared with an average of -3.38% for the three main managed futures indices – an underperformance of -6.04% (-1.71% before the effect of load fees).
The news for the mutual funds was not uniformly negative, though. As you can see from the table below, two of the funds – 361 Managed Futures Strategy and AQR Managed Futures Strategy – did manage to outperform their benchmarks for the year even after considering the effect of load fees (which was easier for AQR, since they don’t charge a load fee). Nevertheless, we don’t find a record of 2 out of 19 very persuasive. Four of the funds below are not included in the averages or our overall assessment owing to the fact that their performance records began partway through 2012, but we will continue to watch all these funds going into 2013.
As always, we don’t think mutual funds are the best vehicle to access the managed futures asset class if you have the capital to stand on your own and invest in individually managed accounts (see after the chart for why), and the numbers continue to back us up. Above all, this chart should highlight one very important investing principle: you should never, ever pay a load fee. Read ‘em and weep below (Disclaimer: past performance is not necessarily indicative of future results).
Click to embiggen.
Sorted by YTD Return After Load
*Indicates funds with partial 2012 data, which are not included in category averages.
We have been critical of these products for a few reasons. For one, they are being marketed as managed futures products, but many do not contain any actual managed futures exposure; rather they merely utilize a trend following model to approximate such exposure. Then there are some that actually do invest in underlying managed futures managers (kudos to you), but do so at a very high cost with extra layers of fees and, more often than not, a high front end sales (load) fee. And then there are those which are not providing managed futures exposure and charging load fees: the worst of the worst. Although the load fees may be waived for investors hitting certain “breakpoints” due to larger investments, we still feel the bulk of these funds will underperform the managed futures indices even without the hefty load fees.
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.