Interviewee: Andrew Beer (DBi)
Interviewer: Mike Pacitto
Date: December 16, 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 2-4:
We’re going with “Simple is Better” for the title of this November/December update because we believe that an elegant, efficient portfolio construction approach to a managed futures strategy emphasizing low costs with fewer moving parts is much more effective than high costs paired with complexity.
Slide 5:
Since inception, DBMF has delivered the powerful diversifying benefits of the managed futures asset class with meaningful relative and absolute outperformance against competitors and its benchmark index. You can see that in this slide showing the historical alpha-generation of DBMF versus the Morningstar® category, as well as against all of the other alternatives categories beyond managed futures as defined by Morningstar®.
We made a full 5-minute animated video on this topic, which you can find at the DBMF microsite – www.dbmf.com
Okay Andrew, all that said let’s get to your update – that’s what they’re here for – over to you!
Andrew:
Slide 6:
Thank you, Mike.
We’re getting dangerously close to year end. We’re going to keep this one pretty short and plan to a longer recap in the New Year for current and potential investors.
After a frustrating October, we bounced a bit in November – up 1% and now up around 8% year to date. Last month, we were a bit behind both the SocGen CTA Index (hereinafter the “Hedge Fund Index”) and the Morningstar US Trend Systematic Category (hereinafter the “Morningstar Category”), but are materially outperforming year to date. This has been a year when the core driver of CTA alpha – medium-ish term trend in major markets – has worked much better than more complicated strategies. Or, as we say succinctly, sometimes Simpler is Better. And maybe Smarter.
Which brings us to our macro theme. I think something profound is going on in the US. I’m calling it a Greed is Good moment – a term coined in the 1987 movie Wall Street. On the economic front, the Trump administration is appointing economic glass breakers – billionaire entrepreneurs, venture capitalists and frackers even – to parachute into dusty government offices. These are guys who are used to doing things fast with five people that the government does slowly with fifty. Love it or hate it, it feels significant – an attempt to reorder whether economic activity is driven by unfettered, unapologetic capitalism or directed by government regulations and incentive structures. This is something we’re watching closely and will be talking a lot about over the coming months. So stay tuned.
[next slide]
Slide 7:
This slide shows year to date performance of DBMF versus the SGCTA and Morningstar category. I’ve been calling this the Year of the Whipsaw – technically it’s been two straight years of whipsaws. In any event, after a great start to the year, the whole space got caught in these oscillations in market sentiment – in non-core markets during the second and early third quarter, then the violent unwind of Trump trades in late July and early August, then the surprise snap back in the Fall. It’s been really interesting talking to CTA managers about this year – short term models and sexy non-core markets – which are supposed to be more immune to these kinds of market moves — have meaningfully detracted from performance. We’ll dive a bit deeper in the New Year on this.
Next slide, please.
Slide 8:
To move to inception to date performance, DBMF has outperformed the target hedge funds by nearly half and, more relevant to advisors, has more than doubled the performance of the mutual fund/ETF peer group. In that Stockholm roundtable, one of the hedge fund luminaries bizarrely made the bold statement that “no ETF will ever outperform CTA hedge funds over time.” We’ve obviously proven otherwise, and the idea that a client-friendly, accessible CTA ETF can persistently outperform hedge funds is leading to a radical rethinking of how allocators should think about accessing this space. Our focus is on wealth managers who build model portfolios, and after five years of research we are ready to talk model allocators through a soups-to-nuts model on how to make a successful allocation to this space. The replication-based index that SocGen launched last year is a key component of this. In any event, my holiday project is to clean up our working slides so we can take you through it in the New Year.
Next slide, please.
Slide 9:
Here’s our slide on volatility-adjusted positioning. The red dots are from the end of September, and the green bars are the end of November. The broad theme is that by the end of the third quarter, we had cut back the strong dollar/rising rates bet that had contributed to gains earlier in the year, but had maintained long exposure to equities, which clearly has been trending up. With the revival of the Trump trade, we are once again long the dollar but now primarily against the Euro – which seems sensible given the issues in Europe — and have a modest bet again on rising long term rates – also probably reasonable given the budget deficit, threatened tariffs, anti-immigration crusade, return of animal spirits, etc. etc. etc. We continue to be long equities, with a bit more of a US focus, are short oil and long gold.
Which brings us to the next slide.
Slide 10:
And here is contribution by factor. We’re showing Q1 to Q3 in one column, then Q4 through November in the next column. As you can see, the big winners this year have been in gold, the yen and equities, while the most difficult market has been Treasuries, where the shifts in market sentiment were most pronounced. As expected, given the whipsaws in fixed income, exposure to those trades is much lower than several months ago, so the pnl in that part of the portfolio has stabilized.
And, with that, I’ll pass the baton back to Mike.
Mike:
Slide 11:
Thanks Andrew — let’s wrap here as we always do with long-term performance comps.
Year to date 2024 through November, DBMF maintains outperformance against its two key secondary benchmarks – at 7.59% since inception, DBMF is ahead of the Soc Gen CTA index by over 245 basis points annualized, and ahead of the Morningstar Systematic Trend Average by over 415 basis points annualized. Outperformance against the AGG, the traditional diversifier for the standard 60/40 portfolio and the primary benchmark by prospectus, inclusive of dividends for both it and DBMF, is over 665 basis points annualized.
All supporting our argument we believe is compelling and two-fold – managed futures is the most potent alternative asset class and should be considered for every portfolio, particularly in the alts allocation — and DBMF is the most efficient managed futures strategy.
Slide 12:
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]
In our latest monthly video update “The Essential Alternative,” DBMF Co-Portfolio Manager Andrew Beer covers October & YTD performance, The Trump Trade, and more. MORE
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. MORE
We’ve titled this monthly update “After The August Storm” because a it was quite a month in markets, during which time DBMF held in relatively well both absolutely and compared to its competitors . MORE
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