No. of Recommendations: 6
A few recent articles I've seen on Meb Faber's Ideafarm are about the benefits of following "trend" as embodied in the Commodity Trend Advisers index, run by Societe Generale - insider baseball term is the SG CTA index. They're managed futures - the index is an amalgam of 20 managed futures hedge funds.
Summarizing an article that came out in May just emailed: "trend" is slow to react and gets hurt in the first stage (up to 10% equity drawdown) just like equities do; but after that, in a protracted bear, this managed futures "sub-universe" substantially outperforms US equities - so it's said to be a good defensive diversifier.
Similar to all the historical research this merry old band was able to do into the venerated timing indicators - BearCatchers - and others. Slow to react at first, provides increasing benefit the longer & stronger the bear market ends up.
Has anyone here tried setting up a signal or an approach that switches into CTA (which only started a few years ago), DBMF, or something similar manfutures fund available through ETFs? If so, what funds might one use, and since its contrarian, what criteria useful to switch into and out of it?
FC
No. of Recommendations: 6
You could do a simple 12 month momentum of a commodity ETF like PDBC and switch some funds to it. To obtain the bulk of the crisis alpha, which is mostly derived from short beta exposure, you probably need to always be in the fund, etc or whatever vehicle and do a monthly or quarterly rebalance to harvest it.
(apologies for the formatting)
I did a simple test at Portfolio Visualizer:
Momentum Model Simulation
Tactical asset allocation model results from 12/01/2015 to 06/20/2025 are based on relative strength model holding the best performing asset.
The model uses a single performance window of 12 calendar month(s).
Tactical asset allocation model trades are executed using the end of month close price each month based on the end of month signals.
The time period was constrained by the available data for Invesco Optm Yd Dvrs Cdty Stra No K1 ETF (PDBC) [Dec 2014 - May 2025].
Tactical Asset Allocation Model Assets
Ticker Name
SPY SPDR S&P 500 ETF
PDBC Invesco Optm Yd Dvrs Cdty Stra No K1 ETF
Portfolio Performance (12/01/2015 - 06/20/2025)
Metric Momentum Model Equal Weight Portfolio Vanguard Balanced Index Inv
Start Balance $10,000.00 $10,000.00 $10,000.00
End Balance $37,967.43 $25,532.55 $21,822.93
Annualized Return (CAGR) 14.94% 10.28% 8.48%
Standard Deviation 14.92% 13.29% 10.50%
Best Year 31.22% 35.65% 21.67%
Worst Year -12.75% -8.41% -16.97%
Maximum Drawdown -19.43% -24.06% -20.85%
Sharpe Ratio 0.87 0.65 0.64
Sortino Ratio 1.41 0.96 0.96
Benchmark Correlation 0.72 0.78 1.00
