Which Managed Futures ETF is Right for You?


Managed futures exchange-traded funds (ETFs) offer a means of diversifying your portfolio. If you’re unfamiliar with this type of investment, it’s wise to acquire a basic knowledge of the benefits, costs, and best funds to complement your current investing strategy. We’ve included an overview of managed futures ETFs along with recommendations for the top-performing funds in this sector for 2020.

What are managed futures ETFs?

According to The Balance, managed futures ETFs are commonly used as a tool for portfolio diversification as the performance features low correlations with the wider market stock index. Expenses average 0.75 percent. Investors generally purchase managed futures ETFs for this reason. They are exchange-traded funds invested passively in a managed futures index with short-term hedging goals.

What you need to know about managed futures before investing

Managed futures are a portfolio comprised of futures contracts that are professionally managed. Buyers purchase investment security or asset at a set price and sellers are obligated to sell them at a predetermined price. The futures may be purchased for hedging to offset losses from other investments through gain on the futures contract, or for speculation, or gambling on a price movement direction. When buying futures contracts for speculation, the expectation is for the price of the asset to increase while sellers expect the price to decline. There are risks associated with managed futures as there are with any investment, but choosing the right ETF provides access to the managed futures market without involvement in the complex aspects of the contracts such as expirations, rollovers, and fees. We offer four of the best-managed futures ETFs for your consideration.

1. Wisdom Tree Managed Futures ETF (WTMF)

ETFDB describes the Wisdom Tree Managed Futures ETF as the largest and oldest of its type on today’s market. Positions are in rising or falling markets are used to achieve positive total returns. Expenses for this ETF run lower than the average 0.75 percent at $0.65. The fund aims to expose investors to the broad market with investments indirectly correlated to wider market equity or fixed income returns. The expense ratio is the lowest of the four managed futures ETFs included in our recommendations.

2. First Morningstar Managed Futures Strategy ETF (FMF)

First Trust reports that the FMF ETF is a fund that is actively managed to achieve positive returns indirectly correlated to the board market/fixed income returns. Investments are made under normal market conditions into a variety of exchange-listed futures. The FMF ETF is listed as an alternative investment fund type under the advisement of First Trust Advisors LP. The fund is listed on the NYSE Arca since August 1, 2013, with an inception price of $50, a quarterly rebalances frequency, and an expense ratio of 0.95 percent. The expense ratio is among the highest of the four managed futures ETF in our listing. The total net assets of the First Morningstar Managed Futures Strategy ETF is $35,126,253 with 802,000 outstanding shares and an average daily volume of 6,279.3.

3. ProShares Managed Futures Strategy ETF (FUT)

According to the Pro Shares website, the ProShares Managed Futures Strategy ETF shares the same goal to provide positive returns indirectly correlated to broad equity/fixed income markets using the S&P Strategic Futures Index to benchmark performance. This is a non-diversified fund and it is the only ETF in the managed futures category that uses a risk weighting methodology to ensure each currency, fixed income position, and commodity invested in represents an equally distributed risk to the entire portfolio which rebalances monthly. The fund aims to profit in both rising and falling markets. Furthermore, it takes both long and short positions within the futures asset classes of currencies, commodities, and fixed income. FUT investments feature streamlined tax reporting for investors by not issuing a K-1 form. The inception date of the ProShares Managed Futures Strategy ETF is February 17, 2016, and the expense ratio is on par with the average at 0.76 percent.

The commodities spread for investments are across Chicago Wheat, corn, soybeans, coffee, sugar, cocoa, cotton, lean hogs, live cattle, heating oil, unleaded gasoline, WTI crude oil, natural gas, copper, and gold. Currency holdings are divided among the Australian dollar, the British pound, the Canadian Dollar, the Euro, the Japanese Yen, and Swiss Franc. For the third category, investments are made in two fixed income futures including US 10-year treasury notes and US 30 year treasury bonds.

4. iM DBi Managed Futures Strategy ETF (DBMF)

According to the IMGP Homepage, the iM DBi Managed Futures Strategy ETF falls in the classification of the liquid alternatives asset class. The investment objective of the fund is to seek long-term capital appreciation. The fund employs both long and short-term position strategies in futures contracts and forward contracts derivatives across a broad spectrum of asset classes of currencies, commodities, fixed income, and equities. Investors may obtain daily portfolio holdings upon request. This fund gives investors exposure to the commodities market, which can by nature, experience extreme volatility. It also provides exposure to foreign currencies, fixed income securities, and derivatives based on fixed income securities. We obtained a snapshot of the holdings for the iMDBi Managed Futures Strategy and observed that as of October 25, 2020, there were a total of 38 assets in the portfolio. The lions share exist in the fixed income classification in US treasury notes with some distributions in foreign currency holdings, crude oil, gold, and a few other commodities. The inception date for DBMF is May 7, 2019. It’s a relatively new fund with a higher than average gross expense ratio of 0.85 percent, but it’s not the highest. The fund follows the SG CTA Index published by Societe Generale which reflects the performance of a pool of commodity trading advisors (CTAs) chosen from large managers employing managed futures strategies that are systematic with annual reconstitution of the index.

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