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The only exchange trading fund in Europe aims to replicate the performance of the managed futures hedge fund industry, but only a small portion of the cost will begin trading today.
This move comes amid growing interest in strategy. BlackRock launched its Managed Futures ETF in the US last week, becoming the biggest player in the “Liquid Alternatives” sector, while heavyweights Invesco and Fidelity in the industry submitted to launch the “Trend Follow” Managed Futures ETF in the US.
The Paris-registered IMGP DBI Managed Futures Fund R USD ETF follows the same strategy as the $1.1 billion IMGP DBI Managed Futures Strategy ETF (DBMF), the largest US registered ETF in the sector. The London list is expected to continue. The price is set at 0.75%.
“Managed futures ETFs are becoming a big thing in the US,” said Andrew Beer, co-founder of DBI and co-manager of ETFs. “Managed futures are one of the few alternative strategies that have the advantages of uncontroversial diversification.”
Trend-followed “Quant” hedge funds run by managed futures funds, commodity trading advisors, can acquire both long and short positions in futures contracts linked to stocks, bonds, commodities and currencies, allowing you to make money whether the market is falling or falling.
This momentum-reducing concept is dominated by relatively expensive hedge funds. According to data provider Barclayhedge, the commodity trading advisor boasts $339 billion in assets at the end of 2024. However, these funds are off limits for small investors, and have not seen as assets growth over the past decade.
Instead, more accessible and generally cheaper mutual funds and ETFs have started to make a big deal on the advantages of hedge funds.
The dominant managed futures mutual fund in the US currently holds $15.2 billion, an increase of 20% since its launch in 2020, while European colleagues hold $13.2 billion, according to data from Morningstar.
Several large homes, such as AQR, Winton, Man AHL, Pimco and Deka, run UCITS mutual funds, which are followed by systematic trends in Europe.
According to Morningstar, the liquidest and usually cheapest vehicle, Managed Futures ETF holds $2.9 billion among nine existing US funds, which has increased more than 10 times since its launch in 2020.
JPMorgan operated a similar ETF in Europe, but closed in 2020. The closest existing alternative is Kronos Strategy ETP securities, but only trades US stock futures.
“The (US market) has gone from $300 million to $3 billion since we entered (2019) (2019),” Beale said. “BlackRock, Investco and Fidelity are all launching US managed futures ETFs, thinking that this space should be $10 billion or $200 billion, rather than $3 billion.
“I don’t see why Managed Futures should be in the hedge fund structure,” he added. “It’s liquid. There’s no need to tie client money to this (by limiting the redemption window).
“I wanted to prove that we can do better than or even better than hedge funds, but in the most client-friendly vehicle that is an ETF,” Beale added.
Beer was also critical of many existing managed futures mutual funds.
“Most of them have performance fees. Why do you have that? Do you think your people would model more difficult if they had an incentive fee? That doesn’t make sense,” he insisted.
DBMF aims to replicate the performance before the representative basket of managed futures hedge funds run by AHL and AQR, by attempting to use algorithms to determine the positioning of CTAS based on daily performance. They then try to achieve the same return using futures contracts linked to assets such as gold, oil, yen, euro, two- and ten-year Treasury, S&P 500.
Since its inception, it has choked up an average annual total return rate of 7.3%, more than 5.3% of the SG CTA index, which is measured at a higher rate.
Morningstar research principal Kenneth Lamont was a widespread supporter of the launch, but he felt that the complexity of managed futures might not be suitable for sophisticated investors.
“What Liquid Alt claims to offer is that there is less correlation to the broader market. They work well at various points. It gives you a higher risk-adjusted return potential,” Lamont said. “Uncorrelated returns are the Holy Grail. That’s what everyone is looking for.”
The evidence seems to support this. During each of the worst three years of the 60/40 stock and bond portfolio of this century, the SG CTA index recorded double-digit profits. Conversely, in four of the six years when the index was red, the 60/40 portfolio made money.
“If (the new ETF) does a good job of providing CTA exposure at a low cost, that should be praised,” Lamont added.
“This is part of the democratization of finance, bringing strategies that were once only the guardians of sophisticated investors, opening them up to a potentially wide range of investors.
“There may be a place for that (but), but given the complexity and fees, I don’t know if there’s a place in the Joe Blog’s portfolio on the street,” he added.
The managed future has been negatively affected by the whipping market that developed early in President Donald Trump’s somewhat idiosyncratic second term, with many of the most popular “Trump Trades” now turning red.
Beale accepted this but was optimistic that the turbulence would prove to be temporary.
“The entire managed futures space was very locked into the Trump trade and that turned it around,” he said. “It’s down 4% this month. These guys don’t always get it right.”
