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Andrew Beer talks about the history and performance of DBMF


Alternatives, the investment arena that contains everything from hedge funds to real estate, has become a more popular investment for advisors and investors this year, as traditional equity and fixed-income portfolios 60/40 experienced difficulties. Within the alternatives subset, liquid alternatives or alternative investment strategies through ETFs, mutual funds, and closed-end funds that offer daily liquidity, saw fairly large inflows this year , with managed futures rising to the top as an outperforming class in its own right. .

The iMGP DBi Managed Futures Strategy ETF (DBMF) had the largest inflows of any managed futures ETF in 2022, earning $349.5 million year-to-date and offering a year-to-date return of 21.92% as of August 16 2022.

Andrew Beer, founder and managing member of Dynamic Beta Investments as well as co-portfolio manager of DBMF, recently spoke to Forbes about the fund, which he leads alongside Mathias Mamou-Mani, co-portfolio manager , Head of Risk and Managing Member. dynamic beta investments.

DBMF seeks to replicate the performance of the 20 largest managed futures hedge funds, which take long and short positions via futures contracts on a variety of asset classes in stocks, commodities, currencies and fixed-income securities. fixed income. It has gained popularity due to the crisis alpha these strategies typically generate during periods of volatility, as well as the potential for uncorrelated diversification they can provide to traditional stock and bond portfolios.

“Nobody has figured out how to pick which hedge fund is going to do well, just like they haven’t figured out how to pick which stock is going to do well,” Beer told Forbes. “The most reliable way to outperform is to reduce fees.”

The DBMF has an expense ratio of 0.85%, which, while higher for an ETF, is still significantly lower than accessing the strategy through a hedge fund which charges an average of 2% administrative costs as well as 20% performance fees. on a profit basis. In addition to fees, hedge funds carry a fairly high barrier to entry, requiring high minimum investments of $1 million and above, preventing entry for most retail investors.

The position the fund takes in futures and domestic managed futures is determined by the Dynamic Beta Engine. This proprietary quantitative model attempts to determine how the largest commodity trading advisory hedge funds have their allocations. It does this by analyzing the 60-day performance of CTA hedge funds and then determining a portfolio of liquid contracts that would mimic hedge fund performance (not positions). The ETF rebalances weekly based on the DBE model.

Beer told Forbes that although DBMF only has 10 futures contracts – currently short on the Japanese yen, euro, US Treasuries and S&P 500 as well as international stocks and long crude oil – the ‘ETFs can replicate 90% or more of the returns of managed futures hedge funds while providing the cash savings that the wrapper ETF provides.

“We’re not trying to say these guys have X amount of pork belly and copy that. We’re basically saying, what are the big trades? said the beer. “You don’t have to pay someone 4% or 5% to make the big trades. We will do it and we will do it efficiently.

The founding of DBi and the creation of DBMF

Beer got his start at Harvard Business School in 1994 and later worked in traditional hedge funds at the Baupost Group, before finally going it alone in the early 2000s and founding two smaller hedge funds. These funds were Pinnacle Asset Management, which traded commodities, and Apex Capital Management, which focused on China.

Eventually Beer founded Belenos Capital Management, a company that would later become Dynamic Beta Investments, and his managed futures fund performed well during the recession, but its growth then fell dramatically in the 2010s. when managed futures contracts have experienced difficulties. iM Global stepped in in 2018 and bought a 50% stake in DBi, and collectively the two launched DBMF in 2019, with DBi as a sub-advisor.

The fund is the largest of the managed futures ETFs, is currently a Morningstar-rated five-star fund, and continues to see strong fund inflows as market volatility continues.

“We think there are thousands or tens of thousands of RIAs now watching the collapse of the 60/40 portfolios and saying, I need something to add to this,” Beer explained. “The next step is to get a large following in the wire houses and the Morgan Stanleys and Merrill Lynches of the world.”

For more news, insights and strategy, visit the Managed Futures channel.
Learn more at ETFtrends.com.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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