When you woke up yesterday morning, this was the headline of the lead story on Bloomberg News:
The past week had been really tough, with bonds and stocks both crushed, regardless of locale. There were panic moves everywhere, but particularly in sterling. Third world type emergency action being considered to control the slide. If the Fed’s mission was to break something, well, mission accomplished. Negative skew everywhere. There was, almost, no place to hide.
Almost because there was one place to hide, a well known asset class that advertises success in periods of adversity and volatility. An asset class that exhibits positive skew, or as my partner likes to say, it crashes up. An asset class that is up this year, and up this month, yet is not particularly dependent on manager skill. Simple Alternative Beta indexes capture the returns nicely. Its liquid and easy to access in a variety of formats.
What is it, you say? Its Managed Futures, of course. Now let me warn you. There will come a point when the markets will settle down, Darth Powell will take his foot off the brake, and traditional assets will recover. Managed futures will likely give back some recent gains, perhaps with a vengeance. But if you had it in your portfolio, the profits you gained could have been rebalanced into those cheap equities and credits, primed for the next move higher. It’s a beautiful thing, but you need to be in the game to win.