Investors Urged to Consider Managed Futures as Bond Alternatives
- Andrew Beer from DBi suggests managed futures could enhance traditional 60/40 portfolios.
- Managed futures may provide better protection against volatility than bonds, according to Beer.
- While managed futures offer diversification, some experts still advocate for maintaining bond allocations in portfolios.
Investors are being encouraged to reassess their bond allocations in favor of managed futures exposure. Andrew Beer, co-founder and managing member of DBi, advocates for this approach, stating that the managed futures strategy could offer a contemporary enhancement to the traditional 60/40 portfolio.
In a recent interview on CNBC’s “ETF Edge,” Beer remarked, “[Bonds have] been dead money for the entire decade.” He expressed his enthusiasm for managed futures, emphasizing their tactical nature and the ability to maneuver quickly when other portfolios remain stagnant.
Beer believes that managed futures, a strategy historically exclusive to hedge funds, could perform better than bonds in volatile market conditions, which have been rising due to recent concerns about debt and artificial intelligence investments. He explained that managed futures exchange-traded funds (ETFs) have the capability to engage in both long and short positions across global markets, preparing investors for market turbulence.
“You want something that has low correlation to both stocks and bonds, and something that will do well in crises,” Beer stated. “It’s very, very hard to find a better hedge fund strategy than managed futures to accomplish that.”
He manages the iMGP DBi Managed Futures Strategy ETF (DBMF), which aims to reflect the performance of leading managed futures hedge funds in a low-cost, liquid ETF format. As of Thursday’s market close, the ETF has experienced an approximate 19% increase this year, according to FactSet data.
Despite the potential benefits, managed futures might not serve as a complete substitute for bonds. Nate Geraci, president of NovaDius Wealth Management, noted in the same interview that bonds still play a vital role in portfolio diversification. He described the fixed income market as “the most challenging area in investing right now” and argued that alternatives should complement, rather than replace, bonds within a diversified portfolio.
Geraci urged investors to be aware of how alternative strategies like managed futures ETFs interact within their overall portfolio. He highlighted that while these funds can outperform during volatile periods, they may also see phases of underperformance. “You have to let that work out over the long-term,” he explained. “To me it’s just a balance. It’s all about diversification.”
News Courtesy of CNBC
