What’s The Best Managed Futures ETF? DBMF vs KMLM vs CTA

If you told me eight months ago I’d be writing an article about Managed Futures ETFs comparing three of the top funds (DMBF vs KMLM vs CTA) head to head I wouldn’t have believed you.

It’s incredible the exponential growth you can have as an investor by remaining curious, reading books/white papers and listening to informative podcasts while maintaining an open mind willing to both absorb and reject new information.

Alternative investments that offer uncorrelated return streams to both long-only equities and bonds are now an integral part of my portfolio and the way I think about diversification and asset allocation overall.

Managed Futures ETFs have offered investors a ray of sunshine in what has otherwise been a stormy year for most traditional asset classes.

Asset allocators committed to equity and fixed income only portfolios are now likely more receptive to alternative investments and strategies given the turbulent results of “so-called” classic portfolios that are prepared for only “growth” and “deflationary” economic regimes.

But what about “inflationary” and/or “recession” economic regimes?

Ah, indeed it’s been decades of smooth-sailing for the 60/40 but this year has revealed that not preparing for all economic outcomes leaves your portfolio vulnerable to the perfect storm that causes equities and bonds to correlate and get torched together.

What's the best managed futures ETF? CTA vs DBMF vs KMLM ETF Review H2H Comparison
source: cocoparisienne via pixabay

What’s The Best Managed Futures ETF?

However, it’s one thing to identify a particular strategy (in this case managed futures) that you want to integrate into your portfolio and another thing to sift, sort and select the best fund that suits your strategic needs.

My goal with this article is to aid you in this process by positing the following question:

“What’s the best Managed Futures ETF?”

A targeted Google search “Managed Futures ETF list” reveals that we’re not entering into a crowded space when it comes to currently available options.

5 Managed Futures ETFs Available For Investors

Managed Futures ETFs currently available including DBMF, KMLM, CTA, FMF, WTMF
source: etfdb.com (vettafi)

Although we have only five to choose from two of them (FMF and WTMF) have been excluded from consideration (more on that later).

Hence, it’s a battle of Managed Futures ETFs that is exclusively between DBMF vs KMLM vs CTA also known as iMGP DBi Managed Futures Strategy ETF vs KFA Mount Lucas Index Strategy ETF vs Simplify Managed Futures Strategy ETF respectively.

Fortunately, I’m familiar with all three products as I’ve done comprehensive reviews for each of the aforementioned tickers:

However, reviewing the funds individually as isolated entities is one thing but comparing them all head to head is an entirely different animal.

With this in mind I’ve come up with the following criteria to compare, contrast and rank by category while crowning an eventual overall winner.

Criteria For Ranking CTA vs KMLM vs DBMF

  1. Overall Strategy Of The ETFs
  2. Unique Features Of The Funds
  3. Isolated Long-Term Performance
  4. Ability To Generate Crisis Alpha (2022 Performance)
  5. Head To Head Performance (CTA vs DBMF vs KMLM)
  6. Manager Experience (Years Running Managed Futures Strategies)
  7. Assets Under Management
  8. Fees

Why FMF or WTMF Didn’t Make The Cut?

Why didn’t FMF or WTMF make the cut for consideration as the best managed futures ETF?

Two specific reasons.

Firstly, both funds didn’t come close to performing as well KMLM, DBMF or CTA this year during a period of expected “crisis alpha” returns.

Secondly, both funds have been in existence for a while and have underperformed benchmarks that you can find on their respective fact sheet/information statement (SG Trend and Credit Suisse Managed Futures) by 100s of basis points since inception with overall anemic returns dating back to 2014 in a head to head comparison.

WisdomTree Managed Futures Strategy ETF WTMF vs First Trust Managed Futures Strategy ETF FMF performance since 2014
source: portfoliovisualizer.com

Don’t get me wrong; I love both WisdomTree and FirstTrust as fund providers!

In fact, I’ve reviewed GDE WisdomTree Efficient Gold Plus Equity Strategy Fund as one of my favourite capital efficient ETFs and FEMS First Trust Emerging Markets Small Cap AlphaDEX® Fund as one of the best multi-factor Emerging Markets funds out there.

However, these two funds have “woofed” to the point of not making the grade for the next round of consideration.

It appears both funds have a strict volatility mandate that is dampening returns.

I’d love to see a strategic overhaul to the point where they can compete with the likes of CTA, DBMF and KMLM as I’d be the first to cheer them on in this regard.

But for the time being it is “Close, but no cigar”.

Hey guys! Here is the part where I mention I’m a travel vlogger! This ETF or Mutual Fund review is entirely for entertainment purposes only. There could be considerable errors in the data I gathered. This is not financial advice. Do your own due diligence and research. Consult with a financial advisor. 

The 3 Best Managed Futures ETFs as represented by pelicans
source: BeckyTregear on pixabay

DBMF vs KMLM vs CTA ETF Review | What Is The Best Managed Futures ETF?

Let the quest begin to find the best managed futures ETF for savvy DIY investors and in-the-know advisors.

We’ll start off with the overall strategy and unique features each fund has to offer.

Managed Futures ETF Strategy + Unique Features

Let’s jump right into the fray by highlighting the top features each fund has to offer.

DBMF ETF

DBMF ETF sets itself apart from its competition by minimizing “single manager” risk by instead attempting to replicate the pre-fee performance of leading managed futures hedge funds without the exorbitant fees. 

It has the capacity to go both long and short Global equity, bond, commodity and currency indexes via futures contracts and forward contracts.

Out of the three funds it is the ONLY one that has exposure to long/short equity indexes.

Moreover, it’s the only one that attempts to minimize single manager risk.

If exposure to long/short equity and minimizing single manager risk are your top considerations DBMF is the fund for you. 

KMLM ETF

Overall, KMLM ETF provides global diversification by trading across 11 commodities, 6 currencies and 5 global bond markets.

What’s immediately apparent is how it distinguishes itself from other managed futures trend-following products by NOT allocating to equity market indexes. 

Every month rebalancing takes place so that each sector is in alignment with its historical volatility.

In terms of the long/short capacity of the fund, KMLM ETF evaluates market trading signals on a daily basis evaluating the price versus its long-term moving average.

It adjusts gross overall exposure (long/short) according to risk level and volatility (which is roughly 200% to 300%).

If letting your horses run wild with high conviction (200 to 300% gross exposure), going global and/or EXCLUDING equity indexes tickle your fancy KMLM ETF probably makes the most sense.  

CTA ETF

CTA Simplify Managed Futures ETF sets itself apart from its competition by providing 4 distinct long-short managed futures strategies under one ETF wrapper (trend, carry, mean reversion and risk-off) along with keying in specifically on commodity and financial futures while excluding equity and currency indexes.

Simplify Managed Futures ETF brings a multi-strategy managed futures approach geared towards absolute returns with the potential to thrive under any market regime.

The fund invests exclusively in US and Canadian commodities and rates only with a stated goal of ensuring low correlation to equities. 

If you’re seeking a multi-strategy managed futures approach (trend, carry, mean reversion, risk-off) and want a more laser focused exposure (US and Canadian commodities and rates) you’ll likely fall in love with CTA. 

DBMF vs KMLM vs CTA Performance | Crisis Alpha When You Need It Most?

Let’s move on to performance where we’ll compare DBMF vs KMLM vs CTA head to head to determine which fund has the best overall returns and whether or not each fund has delivered “crisis alpha” in 2022 with stocks and bonds both floundering.

Since CTA ETF is only a few months old we’ll first compare DBMF vs KMLM before considering the three of them together.

KMLM vs DMBF Performance H2H

iMGP DBi Managed Futures Strategy ETF DBMF vs KFA Mount Lucas Strategy ETF KMLM Returns
source: portfoliovisualizer.com

To say that both DBMF and KMLM ETF have had outstanding returns would be a gross understatement.

They’ve provided “insane levels” of “crisis alpha” in 2022 with returns of 44.75% for KMLM ETF and 31.57% for DBMF ETF.

Although KMLM has outperformed this year it was DBMF providing better returns in 2021 with 11.38% vs 7.06%.

Overall KMLM ETF has delivered a CAGR of 28.44% and RISK of 14.59% versus DBMF ETF offering a CAGR of 24.40% and RISK of 11.93%.

DBMF ETF has been a less volatile fund with a higher SHARPE (1.87) and SORTINO (5.42) vs 1.77 and 4.80 for KMLM ETF.

Note that they both have negative correlation from market returns that Managed Futures strategies typically offer with KMLM (-0.27) and DBMF (-0.40).

KMLM vs DMBF Monthly Performance H2H

DBMF ETF vs KMLM ETF Monthly Returns
source: portfoliovisualizer.com

Noteworthy is that DBMF and KMLM ETF have monthly returns that are quite different from one another.

For instance, out of the 8 negative months KMLM ETF has experienced since January 2021, 4 have occurred when DBMF was above water.

For the 7 months the DBMF ETF was below water, KMLM ETF delivered three positive returns.

That begs the question of the correlation between the two?

 KMLM ETF and DBMF ETF Monthly Correlations

DBMF ETF vs KMLM ETF Monthly Correlations
source: portfoliovisualizer.com

Here we’re able to see that the funds have a 0.71 correlation over a small sample size of monthly returns.

Irregardless, I’m dropping the hint that an ensemble approach between the two funds as opposed to picking a clear winner may be the most prudent allocation strategy.

CTA vs KMLM vs DMBF Returns

DBMF vs KMLM vs CTA Performance and Returns
source: portfoliovisualizer.com

With KMLM and DBMF providing tremendous “crisis alpha” returns in 2022, it would take an almost superhero level effort for CTA to even be considered in the mix.

Well, this is the kind of debut it made in April amidst the backdrop of tumultuous market conditions.


source: Yena Audio on YouTube

Not only has CTA outpaced KMLM and DBMF but it has done so with otherworldly volatility management.

I’m pretty sure I’ve never seen a Sortino Ratio of 91.70 before.

However, it’s paramount to keep in mind this is a very small sample size.

But CTA has firmly established itself as a legitimate managed futures contender with its Thor like entrance into the ETF Terrordome.

 KMLM vs DBMF vs CTA Monthly Correlations

Let’s check out the monthly correlations between the three ETFs.

DBMF vs KMLM vs CTA Monthly Correlations
source: portfoliovisualizer.com

CTA ETF has a 0.51 correlation with DBMF ETF and 0.49 correlation with KMLM ETF.

The unique strategies offered by each fund are rather apparent at this point given that they’re not all slithering upwards and downwards in unison.

In terms of performance out of the gate and crisis alpha all three funds have been tremendous across the board. 

Manager Experience + AUM + FEES: KMLM vs CTA vs DBMF

Let’s zoom in focusing upon manager experience for the three ETFs.

Manager Experience: 3 Managed Futures ETFs

DBMF ETF is a partnership between iMGP (iM Global Partner Funds) and DBi (Dynamic Beta investments).

Andrew Beer and Mathias Mamou-Mani head The New-York based team of Dynamic Beta investments with decades of experience in the alternative hedge fund space.

KMLM ETF is a partnership between KFA Funds and Mount Lucas Management.

Mount Lucas Management, as the sub-advisor, has provided diversifying alternative investment solutions since the late 1980s to a clientele of mostly high net worth individuals and institutions.

Mount Lucas Management has a storied (and most impressive) track-record dating back to 1988.

CTA has its systematic models and overall strategy designed by Altis Partners.

CTA ETF is “new” in the sense it has only been in the ETF marketplace for a few months but has the backing of a CTA management firm that has over 20 years of experience.

All three funds come from very experienced fund managers and firms. 

AUM and FEES: 3 Managed Futures ETFs

Ticker: CTA
Net Assets: $217 (MM)
Expense Ratio: 0.75%

Ticker: KMLM
Net Assets: $338 (MM)
Expense Ratio: 0.92%

Ticker: DBMF
Net Assets: $1,078 (MM)
Expense Ratio: 0.95%

All three Managed Futures ETFs have accumulated assets like a rocket-ship to the moon in 2022.

Furthermore, all three offer hedge fund like strategies without the “typical” high fees all coming in at under 100 basis points.

For those seeking a fund with the most liquidity DBMF is the top dawg.

On the other hand, CTA offers the lowest fees with over 17+ basis points savings.

Chess King crowed as the top ETF between KMLM vs CTA vs DBMF
source: klimkin on pixabay

The Winner: KMLM vs DBMF vs CTA

The whole point of this article was to crown a clear winner between KMLM vs DBMF vs CTA ETFs.

Yet, I’m not able to.

Sorry.

I’m not trying to cop-out or make excuses over here.

This is actually an investing blog with some pretty darn strong opinions from time to time.

As far as I’m concerned, it really boils down to what you want out of your managed futures fund.

Seeking the lowest fees?

CTA.

Longest tenured manager/track-record?

KMLM.

Hoping to eliminate single manager risk and have exposure to L/S equities?

DBMF.

Strong desire for a multi-strategy approach?

CTA.

Want a fund that plays within a high conviction level of 200 to 300% gross exposure?

KMLM.

Want the fund with the most AUM?

DBMF.

Ensemble approach cheers together with glasses of beverages for the win
source: bridgesward on pixabay

Ensemble Approach For The Win?

In my opinion, an ensemble approach is the most prudent way to gain managed futures exposure by integrating all three funds into your portfolio.

Why?

All three funds are strategically diverse enough from one another to the point they add a diversification benefit by combining them as an ensemble.

What would that look like in a portfolio?

That’s entirely up to you to decide.

If you have 15% of an alternative sleeve carved out for Managed Futures a neat 5% each to KMLM, CTA and DBMF makes a lot of sense to me.

If you’ve got 20% available maybe you pick your favourite one with a 10% allocation leaving space of 5% for the other two.

Nomadic Samuel feasting on pub food in Alberta, Canada
Nomadic Samuel feasting on pub food in Alberta, Canada

Nomadic Samuel Final Thoughts

I really appreciate the fact these three ETFs all exist and I support all three via an ensemble approach with my DIY quant portfolio.

I have direct positions in KMLM and DBMF and have exposure to CTA via Simplify Macro Strategy ETF FIG.

It was fascinating to see a poll I put out to my audience on Twitter also favoured an ensemble approach.

DMBF vs KMLM vs CTA poll on Twitter
source: @nomadicsamuel on twitter

However, I’m curious to hear your opinion.

What do you think is the best managed futures ETF out there today?

Let me know in the comments below.

That’s all I’ve got.

Ciao for now.

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