It’s been a relatively good year for gold prices after months of falling prices in the latter half of 2022. Investors continue to buy into gold during peak market stresses, a trend that the iMGP DBi Managed Futures Strategy ETF (DBMF) captures.
Money poured into the major gold ETFs in the first five months of this year. A staple gold ETF, the SPDR Gold Shares (GLD), is up $1.7 billion in net flows year-to-date. Overall, gold ETFs have roughly a combined $5 billion in net flows YTD, and managed futures strategies shifted to capture the trend.
Gold has historically been used as an inflation hedge within portfolios, as well as a diversifier. Prices typically spike during times of extreme market stress and investor fear.
Gold prices rose dramatically in the wake of regional bank failures in March as investors fled to familiar safe havens. GLD is up 8.31% YTD, and gold continuous contract futures are up 8.05% YTD.
Where gold capitalized on bank failures and investor fear, managed futures strategies struggled. The abrupt reversal of the inflation trade that dominated 2022 caught many managed futures funds on the wrong footing. Funds like the iMGP DBi Managed Futures Strategy ETF (DBMF) declined sharply in the wake of March’s bank failures, but this has since largely leveled.
DBMF Captures the 2023 Gold Trend
The sharp rising prices of gold and its popularity since mid-March mean that many managed futures strategies, including DBMF, are currently long on gold.
DBMF allows for the diversification of portfolios across asset classes uncorrelated to traditional equities or bonds. The actively managed fund uses long and short positions within the futures market on several asset classes. These include domestic equities, fixed income, currencies, and commodities (via its Cayman Islands subsidiary).
The fund’s position within domestically managed futures and forward contracts is determined by the Dynamic Beta Engine. The DBE analyzes the trailing 60-day performance of CTA hedge funds. It then determines a portfolio of liquid contracts that would mimic the hedge funds’ averaged performance (not positions).
DBMF takes long positions in derivatives with exposures to asset classes, sectors, or markets that are anticipated to grow in value. The fund also takes short positions in derivatives with exposures expected to fall in value.
Image source: iMGP Funds
Currently, the managed futures ETF is long on gold, the one-year Treasury Bill, the 10-year Treasury Note, the euro, and MSCI EAFE. The fund is short on the yen, 30-day Fed Funds, MSCI emerging markets, crude oil, the two-year Treasury Note, and more.
See more: “Capture Second Half Trends With Managed Futures”
DBMF has management fees of 0.85%.
For more news, information, and analysis, visit the Managed Futures Channel.