Managed Futures Versus Bonds: A Potential New Balance for Traditional Portfolios

Table of Contents

• You might want to know
• Managed Futures and the Role of Bonds
• Key Insights Table
• Afterwards...

You might want to know

• Why are some investors reconsidering the traditional bond allocation in a 60/40 portfolio?
• Can managed futures complement bonds without replacing their role in a diversified portfolio?

Managed Futures and the Role of Bonds

Investors weighing how to balance stocks and bonds may be taking a closer look at managed futures, a hedge fund strategy that can trade across global markets and take both long and short positions. Andrew Beer, co-founder and managing member of DBi, argues that this approach may offer a different form of portfolio diversification from conventional bond holdings. His view is not that bonds have no purpose, but that investors could reconsider how much they allocate to them when other strategies may respond differently to market stress.

Beer described bonds as having been “dead money for the entire decade,” speaking to CNBC’s “ETF Edge” this week. He said he had become interested in managed futures because tactical positioning can be useful when markets move quickly. In his view, the ability to adapt may matter especially when other parts of an investor’s portfolio are less flexible. That argument reflects a broader discussion about whether the traditional 60/40 model—typically associated with stocks and bonds—can still provide the balance investors expect in changing market conditions.

Managed futures strategies seek to identify and respond to trends in markets such as commodities, currencies, equities, and fixed income. Depending on their mandates, these strategies may take long positions when they expect an asset to rise and short positions when they anticipate a decline. This flexibility distinguishes them from conventional bond allocations, which generally do not use the same broad, directional approach across markets. The central feature highlighted by Beer is the ability to take both long and short positions across global markets.

Beer argues this capacity may help managed futures counterbalance equities during periods of volatility, which he said had been increasing amid concerns about debt and the artificial intelligence trade. The logic is that a strategy with returns driven by different market movements may behave differently from stocks and bonds, potentially providing diversification when traditional assets face pressure at the same time. He said investors should look for investments with low correlation to both stocks and bonds, as well as strategies that may perform well during crises.

Correlation describes how closely the returns of different investments move in relation to each other. Lower correlation can be valuable because it may reduce the extent to which a portfolio’s holdings rise and fall together. However, low correlation does not ensure positive returns or protection from losses. Managed futures can experience periods of strong performance as well as periods when the strategy lags. Their results depend on market trends, implementation, costs, and the strategy’s ability to respond to changing conditions.

Beer helps manage the iMGP DBi Managed Futures Strategy ETF (DBMF). According to the firm’s website, the fund seeks to replicate the performance of leading managed futures hedge funds within a low-cost, liquid exchange-traded fund. The structure is relevant because managed futures have historically been more accessible through hedge funds, while an ETF format can provide investors with a publicly traded vehicle. The fund’s approach is intended to make exposure to this strategy easier to access, although investors still need to understand its risks and how it fits their own objectives.

Beer also questioned whether the traditional 60/40 framework should automatically assign a substantial share of a portfolio to bonds. He described an “existential crisis” in strategic asset allocation and model portfolios, and said he values bonds but would not necessarily make them a 40% allocation if they were not contributing enough to the rest of his portfolio. His comments frame the debate as one about portfolio construction rather than a simple choice between holding bonds and abandoning them.

Performance figures can help illustrate how a strategy has behaved, but they should not be treated as a forecast. According to FactSet data, as of Thursday’s close, Beer’s ETF was up almost 19% so far this year. That figure refers to performance through the stated point in time and does not establish how the fund will perform in the future. A strong period may reflect market conditions that favored the strategy, and returns can change as trends shift. Investors considering an allocation should examine performance over different market environments, along with fees, liquidity, volatility, and potential drawdowns.

Importantly, managed futures are not necessarily a replacement for bonds. Nate Geraci, president of NovaDius Wealth Management, said bonds still have a role in portfolio diversification. In the same interview, he described fixed income as one of the most challenging areas of investing at present, while also arguing that alternatives belong in the broader context of a well-diversified portfolio containing stocks and bonds. His position cautions against treating the appeal of an alternative strategy as a reason to give up on fixed income altogether.

Geraci emphasized that investors should understand how alternative strategies, including managed futures ETFs, interact with other holdings. Diversification depends not only on the number of investments in a portfolio but also on how their risks and returns relate to one another. A strategy may provide a source of diversification in one environment yet fail to do so in another. Investors therefore need to consider whether the strategy’s behavior, time horizon, and risk profile are compatible with the rest of their portfolio.

Managed futures may outperform during volatile markets, but they can also go through periods of underperformance. Geraci said investors need to allow such strategies to work over the long term, while recognizing that portfolio construction is ultimately about balance and diversification. This long-term perspective matters because investors who abandon a strategy after a weak period may miss a later recovery, while those who hold it without understanding its risks may be exposed to losses they did not anticipate.

The discussion therefore points to a practical distinction: managed futures may be considered as an additional source of diversification, rather than as a universal substitute for bonds. Beer highlights their tactical flexibility and potential to behave differently from traditional assets. Geraci stresses that bonds continue to have a place and that alternatives should be evaluated as part of a complete portfolio. The two perspectives are not necessarily incompatible: an investor can reassess a bond allocation while still retaining fixed income and considering whether a measured allocation to alternatives suits their goals.

Any decision should be based on an investor’s circumstances, including investment horizon, liquidity needs, tolerance for volatility, and understanding of the strategy. Managed futures can involve complex trading approaches and may not behave as expected in every market. Bond investments also vary in duration, credit quality, and sensitivity to interest rates. Comparing these exposures requires looking beyond recent performance and considering the role each holding is intended to play.

Key Insights Table

Afterwards...

The debate over managed futures and bonds is ultimately a question of balance, not an all-or-nothing decision. Investors may reassess whether their existing allocations still serve their goals, but any change should reflect the distinctive risks and behavior of each asset class. Managed futures could offer a tactical source of diversification, while bonds may continue to support portfolio stability and diversification in ways that alternatives do not always replicate.

As market conditions and portfolio strategies evolve, investors will need to look beyond headline returns and examine how different holdings perform together over time. A thoughtful allocation process can incorporate new tools without assuming that any single strategy will protect a portfolio in every crisis. The forward-looking question is not simply whether bonds or managed futures are better, but how each might contribute to a diversified plan suited to the investor’s needs.