With both stocks and bonds tumbling in lockstep, investors are turning to alternative investments for non-correlated sources of return. Managed futures can provide diversification and reduce volatility when included within a traditional equity and fixed income portfolio mix.
In the upcoming webcast, Can a Managed Futures Strategy Come to the Rescue as Stocks and Bonds Struggle?, Snowy Ding, investment strategist at KraneShares and Gerald Prior III, chief operating officer and senior portfolio manager at Mount Lucas, will highlight the benefits of managed futures and outline one alternative managed futures strategy financial advisors can incorporate into a diversified investment portfolio.
Specifically, the KFA Mount Lucas Index Strategy ETF (KMLM) from KFAFunds, a KraneShares company, offers investment exposure with managed futures.
KMLM’s benchmark is the KFA MLM Index, and the fund invests in commodity currency as well as global fixed income futures contracts. The underlying index consists of a portfolio of 22 liquid futures contracts traded on U.S. and foreign exchanges. The index includes futures contracts on 11 commodities, six currencies, and five global bond markets. These three baskets are weighted by their relative historical volatility. Within each basket, the constituent markets are equal dollar weighted.
The index evaluates the trading signals of markets every day, rebalances on the first day of each month, invests in securities with maturities of up to 12 months, and expects to invest in ETFs to gain exposure to debt instruments.
KMLM can provide access to managed futures through a liquid and low-cost ETF structure. Managed futures are considered alternative investments and may provide additional diversification and decrease volatility when included within traditional equity/bond portfolios, according to KFA.
Mount Lucas Management acts as the sub-advisor to the fund. In 1988, the firm established the first passive index to measure the returns to risk bearing in futures markets.
Financial advisors who are interested in the managed futures strategy can register for the Thursday, June 16 webcast here.