Why Does Anyone Need This?

Thursday I mentioned a backtest that the ReturnStacked guys put up on YouTube showing the negative correlation between equities and managed futures. A little later I noticed how much the ReturnStacked Bonds & Managed Futures (RSBT) is down. With RSBT "for every $1 invested, the RSBT aims to provide $1 of exposure to U.S. bonds and $1 of exposure to a managed futures strategy."

Using the same four managed futures mutual funds they used on YouTube, I built out the following. 

Portfolio 2 should replicate RSBT and being short CASHX to build that one should at least partially address the financing cost. Portfolio 3 is an unleveraged version. 

To be clear, no one suggests putting 100% of a portfolio into RSBT and I wouldn't tell anyone to put 100% into the unleveraged version, they're just for what I believe is apples to apples context. Looking at the numbers, I don't know why anyone needs this and I don't think it solves any problems. 

Changing things up a little to a more modest allocation to managed futures with bonds without any leverage.

Simple isn't always the better choice but it often is the better choice. 

Barron's wrote about how to use AI in an investing context. I've said this before, I think AI can help when used correctly with the right expectations but we need to spend time learning how to use it. All the more so if you're an advisor. For now, my engagement has mostly been asking it to find things, compare funds/strategies and ask it why I might be wrong about something. 

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