New Managed Futures ETF Takes Hedge-Fund Approach

ETF Trends

A new ETF from First Trust Advisors uses a strategy popular with hedge funds in an effort to provide investors with a positive return in any market while diversifying a portfolio of stocks and bonds.

First Trust Morningstar Managed Futures Strategy Fund (FMF) is an actively managed ETF charging an expense ratio of 0.95%.

“Managed futures are an alternative asset class that may benefit from both rising and falling price trends,” First Trust said. “Managed futures have been successfully implemented by institutional investors for nearly three decades, but have been typically offered in hedge funds or private accounts until recently. Exchanged traded funds like FMF make these strategies available to all investors.”

The new fund will compete with WisdomTree Managed Futures Strategy Fund (WDTI), a $140 million ETF with an expense ratio of 0.96%. [ETF Spotlight: WisdomTree Managed Futures Strategy Fund]

“Managed futures strategies have historically had low correlation to stocks, bonds, and other investment strategies, moderate volatility, lower drawdowns than equities and positive returns in a variety of economic environments,” said John Gambla, senior portfolio manager of FMF at First Trust. “Consequently, managed futures can be a potentially powerful diversifier to an investment portfolio.”

The new ETF provides exposure to commodities, currencies, and equities through a long, short or flat futures strategy.

The opinions and forecasts expressed herein are solely those of John Spence, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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