The investment strategy helps generate better risk-adjusted returns. For example, in a hypothetical blend of the S&P 500, Barclays Capital U.S. Aggregate Bond Index and Barclays US Managed Futures BTOP50 Index, Issakainen found that the 45% stocks/40% bonds/15% managed futures portfolio produced a similar return to the 60% stocks/40% bonds portfolio over the last 25 years, except the 45/40/15 portfolio was 22% less risky than than the 60/40 portfolio.
Investors interested in a managed futures ETF can take a look at the First Trust Morningstar Managed Futures Strategy Fund (NYSEArca: FMF), which launched in August. The underlying index includes 34 futures positions consisting of 19 commodities, 9 equities and 6 currencies. FMF is up 2.3% over the past three months.
Additionally, the WisdomTree Managed Futures Strategy Fund (NYSEArca: WDTI) utilizes a combination of U.S. Treasury, currency, and commodity futures. WDTI is up 2.3% year-to-date. [Manage Risk and Diversify with Alternative ETFs]
For more information on ETFs, visit our ETF 101 category.
Max Chen contributed to this article.