Managed Futures Face Ripper?

Don't look now but managed futures have been doing ok for the last six or seven months. Not a face ripper, but pretty good. There's plenty of dispersion in the universe of funds but far from terrible like the last couple of years.

In terms of setting expectations, I would not count on managed futures to keep up with equities in a strong market but they don't have to go down when stocks go up.

Maybe on the heels of 2022 or maybe because of this year's decent performance, JP Morgan has filed for a 100% equities/100% managed futures product that is similar to the Return Stacked US Stocks & Managed Futures ETF (RSST). In response to the filing, Corey Hoffstein Tweeted out a list of several funds that combine equities and managed futures using varying degrees of leverage including the Catalyst/Aspect Enhanced Multi Asset Fund (CASIX). This fund leverages up to 100% 60/40 and 100% managed futures. I heard about this fund when it listed but haven't circled back until now. 

CASIX owns 40% in AGG, it gets its equity via futures and ETFs and then runs a managed futures program on top of that. There is a growing number of funds that blend managed futures with other things, some seem to work pretty well while others do not.

Testfol.io had some sort of distortion for CASIX that I think made the data erroneous. Portfoliovisualizer seems to be correct. I tried to get all of the portfolios to 60% equities, Portfolio 1 has more managed futures and I added absolute return where it would fit. Only Portfolio 3 avoids AGG-like fixed income exposure. 

CASIX seemed to get hit especially hard in April but since May it has traded right inline with the other three portfolios. The trouble acutely visible in April, actually started long before then.

These multi-asset funds really are a mixed bag. Some of them do pretty well to be sure but CASIX seems to have really struggled, it must have been the managed futures program that held it back. There really is dispersion in the managed futures space and it's not that the same funds necessarily always do well while a different batch always do poorly so maybe it's just bad luck with CASIX.

I can't quite see how CASIX would be used in moderation. If you put 50% in CASIX, that gives a 30% weighting to equities and 50% in managed futures which is a lot. If you put 100% into CASIX, that's obviously a 100% allocation to managed futures. If you play around with VBAIX (half of CASIX is essentially VBAIX) versus a bunch of different managed futures funds you'll see varying degrees of negative correlations which will offset some portion of the VBAIX-like exposure in CASIX weighing down overall returns. If you believe in managed futures as a diversifier, I do, then I don't see how the blending math in CASIX can work. If you wanted 20% managed futures, I'm not sure it makes sense to allocate 20% CASIX to get it. 

But if lower volatility is the goal, the are plenty of better ways to do that including Portfolios 2 and 3 which I pretty much just pulled out of the air. 

A funny follow up to yesterday's post. I mentioned that there has essentially been no differentiation between the iShares US Quality ETF (QUAL) and the S&P 500 Index which is of course market cap weighted. I got an email from an ETF provider promoting their quality ETF that noted....the lack of differentiation between QUAL and the S&P 500 Index.

And a quick closeout with a stock I've held for clients since 2004, having a monster year in 2025, up about 40% versus 14% for the S&P 500.

It's a relatively low vol name that is considered a defensive stock in blue. It drifted for a couple of years before ripping this year. You can observe on the chart generally much smaller drawdowns, only 7% in 2008 and it was up in 2022. Once you accept that no stock or fund can always be best, there's been no reason to sell the name the whole time I've owned it. Sometimes it's outperformed, sometimes it's lagged and that recent run of underperformance appears to be it's worst multiyear period on a relative basis for as far back as testfol.io goes. I expect the same, going forward. I think the stock price will be fine and I have unyielding faith it will continue to do well as a defensive hold. 

Impatience is an emotion that leads to bad decisions. No one can make the best decision every time but recognizing impatience seems a little easier to overcome than a fear based reaction. If that's correct, don't be too quick to throw in the towel.

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