1st at Morningstar = 144th in the Real World

361 Capital has a press release out announcing its 361 Managed Futures Strategy mutual fund (AMFZX / AMFQX) was rated the top-performing mutual fund in its category by Morningstar for the 12 months ending June 30, 2013.  Congratulations to them, they are surely doing something better than the rest of Morningstar’s “Managed Futures” category (quotations meaning the heavy use of sarcasm) – but we can’t help but think this is a little like being the cleanest dirty shirt. We’re the curious sort, so we couldn’t help but wonder where their 8.12% return over those 12 months would rank amongst the 784 programs in our database and against our recommended list.

As it turns out, that #1 ranking would put them all the way down to 144th place when looking at all programs (but still in the top 20% of all programs), and below a third of our recommended list. Now, we know this is a little bit of an apples to oranges comparison (after all, those managers above 361 charge the full 2 and 20 fee structure, which is just impossible quite possible to overcome), and to be fair, they weren’t implying they were #1 across the whole managed futures universe, stating clearly it was just in the Morningstar managed futures category.

So while congratulations may be in order, there are just two little problems we see –

1. There’s more to being successful than just last year’s returns – a true ranking needs to consider the risk as well.

2. This is a counter-trend strategy which operates on U.S. stock indices only; meaning – it likely won’t provide the crisis period returns one might expect from a ‘managed futures’ fund during a market crash. Indeed, being counter-trend, we would expect it to suffer losses during a crisis period where stock indices see extended down moves.

The takeaway – be careful out there. 361 may fit in great with what you are trying to do in your portfolio; but if it’s in your portfolio because of the name ‘managed futures’, make sure you understand exactly how it will and won’t correlate to managed futures in a market crisis.





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