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Philip van Doorn

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May 16, 2022, 7:06 a.m. EDT

These 4 funds are 2022 winners — they use a hedge-fund-like strategy to cut risk

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    S&P 500 Index (SPX)
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    iMGP DBi Managed Futures Strategy ETF (DBMF)
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    Natixis AlphaSimplex Mgd Futures Strategy Fund;N (AMFNX)

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By Philip van Doorn

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  • The Standpoint Multi-Asset Fund /zigman2/quotes/215319668/realtime BLNDX -0.51% follows a hybrid approach — it is about 50% invested in long equity and bond positions (mostly stocks) through a group of ETFs, with the rest invested per a managed futures strategy, long and short, across asset types. Its performance on the two-year chart, above, bears out the strategy. You can read more about the fund here . Eric Crittenden, co-manager of the Standpoint Multi-Asset Fund, wrote in an email that he has increased short exposure to bonds this year, while increasing long exposure to the dollar against other currencies. He has also reduced what he called “significant” long exposure to commodities while increasing “modest” long exposure to energy markets. “The theme here is stagflation, and it is not expected to be smooth or fun. It is by far the toughest market environment to navigate as an investor,” he wrote.

  • The three mutual funds listed above (that is, excluding DBMF) have multiple share classes. The charts show the institutional share classes, which have the lowest expenses and the highest account minimums. But some brokers are able to offer the institutional shares to their customers with lower account minimums.

Loewengart said the Class A (or Investor Class) shares for the funds are available without sales charges at E-Trade and most other large brokers, even though the prospectuses might list sales charges.

The Class A tickers for the mutual funds are:

  • AlphaSimplex Managed Futures Strategy Fund /zigman2/quotes/200704231/realtime AMFAX -0.10% .

  • Pimco Trends Managed Futures Strategy Fund /zigman2/quotes/208522899/realtime PQTAX -0.09% .

  • AlphaSimplex Managed Futures Strategy Fund /zigman2/quotes/215316208/realtime REMIX -0.52% .

Avoid ‘performance-chasing’

“My concern is about performance-chasing. Investors may go in, looking at recent results, not being entirely cognizant” of the risks, Loewengart said.

Chasing performance is a phenomenon that also affects investors within equity strategies. They might move money into “last year’s best-performing stock fund,” without considering that they might be buying high and underperform the following year.

Loewengart stressed that “commodities have done well during this period of volatility, once inflation sunk in.”

So this is a special time for commodities and of managed futures funds. Now take a look at a five-year chart for the AlphaSimplex Managed Futures Strategy Fund, the Pimco Trends Managed Futures Strategy Fund and the S&P 500. (The two other funds are less than five years old):

This shows the risk of the managed futures strategies. They are “having their moment,” Loewengart said, outperforming during this difficult period of high inflation and rising interest rates. But they missed a portion of the bull market that preceded the downturn.

“By themselves, managed futures strategies may not be appropriate for many investors. But when you include them within a well-diversified portfolio, you can reduce the risk of the portfolio over time,” Loewengart said.

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