While past performance is no guarantee of future returns it can set expectations for how a fund might perform. A fund, regardless of strategy, is unlikely to be a bond market proxy (or what people hope a bond fund will do) if it captured a large portion of the equity market rally. That fact wouldn’t invalidate the strategy/fund but many funds that look like equities on the way up will look like equities on the way down.
The negative duration funds are interesting and while I have no reason to expect them to fail they’ve not really been exposed to a prolonged period where rates actually rose.
As a related follow up, a reader left a comment on the Seeking Alpha version of my recent post about Zvi Bodie. Bodie believes in having as little in risk assets as possible having previously suggest 10% in risk assets and 90% in TIPS. The reader took issue with TIPS because they have done poorly in recent years. The reader cited that one of the TIPS ETFs lagged for 1, 5 and ten years so he had no interest in them. TIPS have probably done poorly because there hasn’t been any inflation to speak of. One of the problems that the FOMC is dealing with is not enough inflation.
And so it is with alternative strategies as bond substitutes for periods of rising rates; rates haven’t actually gone up yet in a meaningful and lasting way.
This reinforces the idea that exposure should be small, less than the 20% proposed in the above linked article. I do think several strategies can work provided the bond market doesn’t fail to function as it did in 2008. I don’t think we are in for a repeat of 2008, the next crisis will be different than 2008 just as 2008 was different than 2000-2002.