#156: Your Futures Managed

S2N Spotlight

If you have been involved in the hedge fund/managed futures space for some time, you will have come across numerous databases and indexes. Today we have options where you can invest in an ETF that replicates an index and “manages the futures for you.” Probably the best-known one, managed by Andrew Beer, is DBMF.

iMGP DBi Managed Futures Strategy ETF (DBMF):

Objective: DBMF seeks to replicate the performance of leading managed futures hedge funds by using a systematic, rules-based approach. Specifically, it attempts to match the performance of a pool of top managed futures hedge funds as represented by the positions they take.
Approach: DBMF uses the Dynamic Beta Engine, which attempts to replicate the performance of the largest managed futures hedge funds (often represented by an index of futures hedge funds like the SocGen CTA Index) by analyzing the factors driving their returns. It invests in futures contracts and forward contracts across various asset classes, such as equities, fixed income, currencies, and commodities.
Fee Structure: As an ETF, DBMF offers a relatively lower cost structure compared to traditional hedge funds or managed accounts, with an expense ratio around 0.85%.

For a data junkie like me, having access to daily data without paying fees is pretty cool. Here is a bit of a deep dive on its performance.

In summary, performance has been pretty consistent, but the Sharpe ratio is still only 0.7, which I think is decent but nothing special. It is also worth pointing out that this fund has been in drawdown since 2022; see chart below. I mentioned yesterday Millennium’s Sharpe ratio of 2.6 over 35 years. If you achieve a Sharpe ratio of greater than 1 for more than 5 years, you are in a pretty unique space. One of the nice things about this ETF is that you avoid the heavy fees most of these programs charge.

Key takeaway: Trading is friggin difficult. Set your goals realistically.

S2N Observations

I have been harping on about my call to go long Chinese stocks (via the Hang Seng) versus US stocks. Forgive me for basking in this contrarian call.

My preference, as I foresee less manipulation on the Hang Seng.

While the pop on the Hang Seng hasn’t been as strong as the Shanghai Exchange, it is still pretty decent with a 10-day return of more than 21%. One of the bigger 10-day moves in history.