Under the Hood of DBMF’s Dynamic Rapid Response Strategy

In an ever-changing market environment, portfolios continue to ride the performance roller coaster. Managed futures are useful not just for the low correlations to stocks and bonds but for the strategy’s ability to rapidly respond to changing market regimes. Funds like the iMGP DBi Managed Futures Strategy ETF (DBMF) are worth consideration as long-term additions in portfolios for their dynamic strategy.

On average, managed futures strategies take just two weeks to rapidly pivot their entire portfolio. This makes them particularly valuable in times of market dislocation. It also makes the strategy a dynamic one. Managed futures take long and short positions across four core asset classes that include rates, commodities, equities, and currencies.

See also: “Managed Futures: The Rapid Responders in Crisis and Beyond

Chart demonstrating the volatility-adjusted positioning across asset classes for DBMF between June 30 and October 31, 2023.

Image source: DBi and iMGP

“We show it this way since it can be confusing when looking at notional position sizes,” explained Andrew Beer, co-founder of Dynamic Beta investments and co-PM of DBMF in a recent video. “What looks like a big position in something like the two-year Treasury might be less risky than a small position in crude oil. This helps to make the exposures more apples to apples.”

Between the end of June and October, DBMF moved from a long gold position to a short one. The fund also moved into a long position in crude oil from a short position. A long position in the euro flipped to a short one. Meanwhile the strong short position in the yen moved to shallower short position.

The long position in the 10-year Treasury in the wake of the regional banking crisis earlier this year moved to a short position by October. A long position in U.S. equities also flipped to a shallow short position. Shorts in EAFE, short-term Treasuries, and emerging markets remained largely unchanged between the end of June and October.

DBMF Offers Dynamic, Noncorrelated Strategy in ETF Wrapper

The iMGP DBi Managed Futures Strategy ETF (DBMF) is an actively managed fund that uses long and short positions within derivatives (mostly futures contracts) and forward contracts. These contracts span domestic equities, fixed income, currencies, and commodities (via its Cayman Islands subsidiary).

The position that the fund takes within domestically managed futures and forward contracts is determined by the Dynamic Beta Engine. This proprietary, quantitative model attempts to ascertain how the largest commodity-trading advisor hedge funds have their allocations. It does so by analyzing the trailing 60-day performance of CTA hedge funds and then determining a portfolio of liquid contracts that would mimic the hedge funds’ performance (not the positions).

DBMF has a management fee of 0.85%.

For more news, information, and analysis, visit the Managed Futures Channel.