These contracts span domestic equities, fixed income, currencies, and commodities (via its Cayman Islands subsidiary). DBMF is an actively managed fund that uses long and short positions within derivatives (mostly futures contracts) and forward contracts. The fund is currently down 5.32% YTD, presenting an opportunity to gain access to the popular strategy at a discount. By offering the strategy within the cost-efficient ETF wrapper, DBMF seeks to provide similar performance with significantly reduced management fees. The iMGP DBi Managed Futures Strategy ETF (DBMF) seeks to capture the average return of the 20 largest managed futures hedge funds. “We think we’ll look back on the first several months of 2023 as a great example of the latter, but also a case study that the strategy recovered as expected.” Seize the Investing Opportunities in DBMF “Since 2016, we’ve seen that there are periods when we’re flipping more heads than we expect, and others when we’re flipping more tails,” Beer wrote to VettaFi. Over long timelines, DBMF outperforms more often than it underperforms. This allows the strategy to capitalize on the fee savings that the ETF wrapper provides. Over a longer timeline, performance invariably smooths out. While current performance is statistically rare, it’s not “unprecedented” as Beer explained in the video. It’s worth noting that the luck (monthly noise of replication) does work in the other direction too. Beer refers to the odds as a three-sigma event, putting the odds at one in 100 for such a performance. It’s the worst rolling six-month performance for DBMF since its inception in 2019. This year’s performance is statistically akin to flipping five or six tails consecutively. This means that while sometimes the fund outperforms the index, sometimes it underperforms too and misses opportunities the hedge funds may have captured. While the fund trends up and down with the SocGen CTA Index, it is more narrow in scope than broad-reaching hedge funds. The underperformance is instead due instead to the specific “factor set” DBMF currently employs, Beer explained in a recent DBMF monthly performance video. The fund currently has an almost 89% correlation to the index. The strategy and replication model are working as intended, with correlations at normal historical levels. The fund continues to underperform the SocGen CTA hedge fund index YTD. “Just like flipping coins, you will have hot and cold streaks, but over time it washes out. As an allocator, the key is to make sure the coin isn’t broken.” DBMF's 2023 Hard Luck Investing StoryĢ023 continues to prove challenging for DBMF, a managed futures hedge fund replication ETF. “Every strategy has an element of luck,” Beer said in a communication to VettaFi.
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