Introduction
Managed futures ETFs are investment funds that passively trade in managed futures indices. People often buy managed futures ETFs as a diversification tool because the performance of these funds is not tied to a broad market equity index, such as the S&P 500. The average expenses for these funds are 0.75% or $7.50 per $1,000 invested.
What are managed futures?
The term “managed futures” refers to a portfolio of futures contracts that is professionally managed. Futures contracts, or “futures,” are agreements in which the buyer commits to purchasing, or the seller commits to selling, a security or asset at a predetermined price. Futures are bought either for speculation (betting on a specific direction of price movement) or for hedging purposes, such as offsetting a loss from an asset or investment with a gain from a futures contract.
Top Managed Futures ETFs
Purchasing managed futures ETFs can be a straightforward and easy way to access the managed futures market without dealing with some of the complex aspects of futures contracts, such as fees and rollovers. If you are considering investing in one of these funds, here are some top examples:
WisdomTree Managed Futures ETF (WTMF): This fund is the oldest and largest managed futures ETF currently on the market. WTMF, which was previously traded under the ticker WDTI, seeks to achieve positive total returns in rising or falling markets that are not directly related to the returns of broad market equities or fixed income. The expenses for WTMF are 0.65%, or $6.50 per $1,000 you invest, which is lower than the category average of 0.75%.
First Trust Morningstar Managed Futures Strategy ETF (FMF): Unlike most ETFs, FMF is actively managed, meaning it seeks to outperform its benchmark, the Morningstar Diversified Futures Index. To do this, FMF management selects investments from the benchmark and manages the contracts in a way that can outperform the entire index. The expense ratio for FMF is 0.95%.
ProShares Managed Futures Strategy ETF (FUT): This fund is actively managed and uses the S&P Strategic Futures Index as its target benchmark. It aims to achieve positive returns in both rising and falling markets. This is accomplished by taking long and short positions in futures across various asset classes, including commodities, currencies, and fixed income. The fund’s management rebalances the portfolio monthly. The expenses for FUT are 0.75%.
Warning About Investing in Managed Futures ETFs
These funds may use hedging strategies that involve investing in assets not related to the stock market. This can lead to good returns when the stock market is declining. However, managed futures ETFs may generate negative returns when equities have performed well.
If you wish to invest here, the best option may be to invest in a diversified portfolio of mutual funds or ETFs that invest in a balanced mix of stocks and bonds that suit your risk tolerance and time horizons.
Source: https://www.thebalancemoney.com/managed-futures-etfs-benefits-costs-and-best-funds-4174267
Leave a Reply