Interviewee: Andrew Beer (DBi)
Interviewer: Mike Pacitto
Date: October 9, 2024
Mike:
Slide 1:
Hi everyone, I’m Mike Pacitto with iM Global Partner, joined by Co-Founder of DBi and Co-Portfolio Manager, Andrew Beer. Thanks for joining our monthly update on the iM Global Partner DBi Managed Futures Strategy ETF– ticker: DBMF.
Slide 2:
We’re going with “Index Plus” for the title of this September update because, simply put, that is what we strive to do in the managed futures category with DBMF – and DBMF has delivered, as our clients know, in outperforming both the category at large and the SG CTA Index which it seeks to replicate while disintermediating fees.
Slide 3
Along those lines, you may have heard of a new managed futures index that DBi is directly involved in – the SG CTA Managed Futures Index. On your trusty Bloomberg machine you can find more information on it by typing in SGMDDBMF INDEX.
So with that Andrew let’s proceed with an update on DBMF for the month that was September –
Andrew:
Slide 4:
Thank you, Mike.
On the macro front, September looked a lot like August: a brief panic then relative calm. Overall, the markets seem remarkably indifferent to what feels like a long list of geopolitical and macroeconomic headwinds. In any case, the party continues and, by the end of the month, both stocks and bonds had risen modestly and risk assets are having another strong year.
On the DBMF side, we ended the month up around a point, roughly in line with the SocGen CTA Index (hereinafter the “Hedge Fund Index”) and the Morningstar US Trend Systematic Category (hereinafter the “Morningstar Category”). The big news this year has been our outperformance: if you look at those columns on the left, about 900 bps ahead of hedge funds this year. As discussed previously, this is largely due to missing some ugly whipsaws in things we, by design, do not trade.
[next slide] 5
This slide shows year to date performance of DBMF versus the SGCTA and Morningstar category. As discussed in the past several videos, this has been a great year to avoid whipsaws in many noncore markets – most of which occurred in the late Spring and Summer. The criticism of replication with ten deep, liquid futures contracts is that we’ll miss alpha generation from more esoteric trades. It sounds like a great argument, except that we just don’t see it in the data. Yes, they can generate positive alpha at times; in others, though, you can have negative alpha, like this year. Hence, complexity and diversification in this space are two edged swords. If anyone wants to drill down deeper on this, please reach out.
Next slide, please. 6
To move to inception to date performance, DBMF has outperformed the target hedge funds by approximately 300 bps per annum with a correlation of nearly 0.9. More relevant to advisors, DBMF has more than doubled the performance and Sharpe ratio of the mutual fund/ETF peer group. The fact that risk adjusted returns are higher supports our argument that fewer instruments do not increase risk over time – relative to fee and expense savings. Our goal remains the same: to provide a compelling access point for allocators to gain exposure to this valuable strategy while minimizing known landmines, like single manager risk and fee/expense drag.
Next slide, please. 7
Once again, here is our regular chart on Stocks, Bonds and DBMF. Since inception, DBMF had a negative correlation to both stocks and bonds and plenty of annualized alpha to equities. Note that over this period, stocks and bonds have had a high positive correlation. Hence, when we look across the liquid alts landscape, we think DBMF is a great candidate anchor the diversifying bucket in this industry-wide shift from 60/40 to 50/30/20.
Next slide please: 8
Here’s our slide on volatility-adjusted positioning. The red dots are from the end of June, and the green bars are the end of September. Clearly, there was a lot of repositioning this month. Starting on the left, we’ve cut all long exposure to crude oil but maintained it for gold. In currencies, we eliminated the long Euro position and are reducing our short position in the Japanese yen – which went from the gift that keeps on giving to one that kept on taking – so I’m glad we’re out of it. On the fixed income side, we flipped from short Treasury to long and are long equities. Hence, for the first time in long time, we are tactically long both stocks and bonds.
Which brings us to the next slide. 9
And here is contribution by factor. We’ve broken it out by 1Q, 2Q and 3Q to underscore the significance of some of the moves this year. The third quarter was rough given the sharp shifts in the market narrative, in particular the yen short and bets on rising rates in the Treasury futures were upended when the market flipped to expectations of multiple rate cuts by year end. We did eke out gains in the Euro, gold and developed markets equities. Let’s hope the fourth quarter looks more like quarters one and two.
And, with that, I’ll pass the baton back to Mike.
Mike:
Slide 10
Thanks Andrew — let’s wrap here as we always do with long-term performance.
First though, we’d like to point out that we’ve added the Bloomberg Agg to our comps – since many allocators have traditionally used core bonds to counter-balance their equity positions – and as alternatives become more critical as diversifiers and ideally, sources of alpha and performance – we want to highlight DBMF accordingly.
So year to date 2024 through September, DBMF maintains its outperformance against its two key industry benchmarks – DBMF ahead of the Soc Gen CTA index by over 290 basis points annualized, and ahead of the Morningstar Systematic Trend Average by over 440 basis points annualized. The outperformance against the AGG, inclusive of dividends for both it and DBMF, is over 720 basis points annualized.
Slide 11:
In closing, thanks as always to our clients and to our prospective clients for your confidence and interest in DBMF
If you have more questions about the strategy, would like further information or a call with us please don’t hesitate to reach out – just send us an email at: [email protected]
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