Andrew Beer delves into DBMF’s year-to-date performance – ETF trends | Jewelry Dukan

After a decade of lackluster interest and performance, managed futures have more than proven their worth and value this year in a macro environment fraught with volatility and changing market regimes. Andrew Beer, Managing Director of Dynamic Beta Investments and Co-Portfolio Manager at iMGP DBi Managed Futures Strategy ETF (DBMF), spoke with Todd Rosenbluth, Head of Research at VettaFi, on the fund’s performance and managed futures space in a recent webcast hosted by VettaFi.

Dynamic Beta Investments is the Fund’s Sub-Adviser and Beer has extensive experience in the hedge fund industry and has long believed in the potential of the strategies hedge funds employ. However, hedge fund investing comes with significant barriers to entry (individual investors must be accredited or institutional investors) and high fees.

A strategy that has lagged behind hedge funds over the past decade, managed futures use data trends to determine how to invest in different assets (stocks, currencies, fixed income) and what types of positions to take. They perform best during periods of market volatility, and Wards and Beer explained the rationale for bringing the strategy into the ETF wrapper.

“We’re unique in this space in that we didn’t come up with this as a bunch of people creating these strategies and trying to improve them over time, rather we thought about how we could leverage the diversification benefits of the strategy.” …but how can we do better than real hedge funds by lowering fees, how can we reduce the risk of an explosion that makes it harder for us to maintain the investment,” explained Beer.

Image Source: Dynamic Beta Investing Webcast

It’s been a stellar year for DBMF: the fund started January with just $65 million in assets under management and is now approaching nearly $700 million in assets under management. The fund had become a strong portfolio diversifier this year, offering significant returns (28.99% YTD as of 09/14/22) and was one of the few stocks to actually close higher on September 13, 2022 as markets plummeted .

Beer further explained that DBMF was created as a diversifier for model portfolios.

“I think if you’re running an ETF-based model portfolio, the question is, do you want to deviate from traditional assets and look for things that can really help protect your portfolio during times like these, while making money in it?” For our part, in normal times we have struggled to find anything better than the strategy and we are very pleased to say that we believe DBMF has been able to deliver so far,” said Beer.

Under the hood of DBMF

DBMF invests in ten different core futures markets: three different equity futures contracts, three different interest rate futures contracts, two currency futures contracts and two different commodity contracts.

“When we’re deciding what to invest in, we philosophically believe that market depth and liquidity are really, really valuable, precious things because they allow us to enter and exit positions with virtually no trading costs,” Beer explained . “This means that as the cracks under the market continue to widen, more liquidity will flow into the things we trade.”

This year, that had meant the fund capitalized on three big trades that generated much of its returns: DBMF was long crude oil early enough to capture the strong returns in early 2022; it was short government bonds when REITs soared and then took advantage of the strong US dollar in the futures market to generate returns. 2022 has proven to be the perfect storm for extremely strong managed futures performance as both bonds and stocks have moved in correlation while managed futures remain uncorrelated with either.

“Managed futures are at their best when the unexpected or seemingly impossible is happening in the markets,” Beer said. “We believe the diversification argument has really been solidified this year and there’s no reason to think that the returns we’ve made will reverse or even diminish over time, given only the market we’re in where we are.”

However, it is a strategy that is not limited to extreme volatility and can work just as efficiently in deflationary environments, recessions and more as a data-driven strategy that relies on spotting trends and capitalizing on them, whether in a tail down or up moving market.

Stay tuned to the Managed Futures Channel for more news, information and strategy.

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