Managed Futures Mutual Funds June Update

With June now in the books, we see that so-called managed futures mutual funds are now underperforming the average of the benchmark indices for the year by an average of -8.16% after the effect of load fees (and -3.83% before the load fees).

Earlier this year we expanded our look at managed futures mutual funds to consider all of the new entrants into the space. 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.

We don’t think mutual funds are the best vehicle to access the asset class if you have the capital to stand on your own and invest in individually managed accounts; and the numbers continue to back us up. After a less-than-stellar month for managed futures across the board, every mutual fund we track is underperforming the major managed futures indices after considering their front end sales fees. Read ‘em and weep below (Disclaimer: past performance is not necessarily indicative of future results).

Click to embiggen.

Sorted by YTD Return After Load

Comments

  1. Your representation of the mutual fund load is way off base. I expect more from a research oriented outfit like you who is usually so good at sorting the details out.

    Most mutual fund business is not done on an upfront load basis. If it is it usually utilizes a “breakpoint” to reduce the upfront load for larger purchases and access the fund at a lower cost. For you to reflect the load in all mutual fund performance is far from realistic.

    For you to represent mutual funds as grossly more expensive that private placements and LP’s. The mutual fund I know of IS less expensive than the LP alternative.

    • Attain Capital says:

      Thanks for the comment, but please note that we do look at performance both before the load fee and after it, meaning those who may qualify for waived load fees can concentrate on the pre-load fee performance. And what would the alternative look like? Surely it would be misleading to ignore the load fee altogether when they ARE being marketed to smaller investors who have no hope of reaching the “breakpoint”.

      In the spirit of more disclosure, we’ll add a line saying the load fees may be waived for investors hitting certain “breakpoints” due to larger investments, but we still feel the bulk of these funds will underperform the managed futures indices even without the hefty load fees.

      Regarding the cost of LPs and private placements, we won’t completely disagree with you. Some of those funds are far more expensive in terms of fees, which is why it’s so important to conduct thorough due diligence before making an allocation. There are some that have less fees, however, and it is rare for many to charge a front end load fee in our experience.

      At the end of the day, though, the proof is in the pudding- and the performance of these mutual funds moving forward will show how good of a job they do providing managed futures exposure.

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DISCLAIMER

Forex trading, commodity trading, managed futures, and other alternative investments are complex and carry a risk of substantial losses. As such, they are not suitable for all investors.

The entries on this blog are intended to further subscribers understanding, education, and – at times- enjoyment of the world of alternative investments through managed futures, trading systems, and managed forex, and is not intended as investment advice, or an offer or solicitation for the purchase or sale of any financial instrument. Unless distinctly noted otherwise, the data and graphs included herein are intended to be mere examples and exhibits of the topic discussed, are for educational and illustrative purposes only, and do not represent trading in actual accounts. Opinions expressed are that of the author.

*The mention of specific asset class performance (i.e. +3.2%, -4.6%) is based on the noted source index (i.e. Newedge CTA Index, S&P 500 Index, etc.), and investors should take care to understand that any 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 and self reporting biases, and instant history.

The mention of general asset class performance (i.e. managed futures did well, stocks were down, bonds were up) is based on Attain’s direct experience in those asset classes, estimates of performance of dozens of CTAs followed by Attain, and averaging of various indices designed to track said asset classes.

It should be noted that past market performance is not indicative of future market movement.No market data or other information is warranted by Attain Capital Management as to completeness or accuracy, express or implied, and is subject to change without notice.

Managed Futures Disclaimer:

Past Performance is Not Necessarily Indicative of Future Results. The regulations of the CFTC require that prospective clients of a managed futures program (CTA) receive a disclosure document when they are solicited to enter into an agreement whereby the CTA will direct or guide the client’s commodity interest trading and that certain risk factors be highlighted. The disclosure document contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA.