ETF Edge on Using Managed Futures to Navigate Volatility During the Iran War

Why It Matters

Managed futures ETFs provide a scalable, tax‑efficient hedge against market turbulence, enabling investors to diversify beyond equities and bonds as geopolitical and macro risks intensify.

Key Takeaways

• Managed futures ETFs offer diversification with low correlation to stocks.
• ETFs package hedge‑fund strategies, delivering tax‑efficient, pre‑tax returns.
• Recent market volatility spurs inflows; DBMF attracted over $1B this year.
• Advisor education and behavioral discipline are crucial for long‑term success.
• Costs can be trimmed by 400 bps versus traditional hedge‑fund models.

Summary

ETF Edge hosted a timely discussion on managed futures ETFs as investors grapple with heightened volatility stemming from the Iran conflict and broader macro uncertainties. Andrew Beer of Dynamic Beta Investments explained that managed futures, run by commodity trading advisors, use systematic models to trade futures across commodities, currencies and rates, delivering a strategy that historically shows low drawdowns and low correlation to traditional equity‑bond portfolios. Nate Jerase highlighted the surge in investor interest, noting the managed futures ETF universe—about $6.5 billion in assets—has attracted over $1 billion of inflows this year, with DBMF posting a 22 % gain in 2022 while stocks and bonds fell sharply.

Both guests stressed that the ETF wrapper makes a traditionally hedge‑fund‑only strategy more accessible, tax‑efficient and cost‑effective. Beer pointed out that Dynamic Beta replicates hedge‑fund tactics while shaving roughly 400 basis points in fees, and that the goal is to deliver strong pre‑tax and after‑tax returns for a modest portfolio slice—often 3‑5 %. Jerase warned that many advisors remain under‑exposed to these products and need deeper education to manage the active, quantitative nature of the strategies and the behavioral discipline required during inevitable periods of underperformance.

The conversation underscored the broader industry shift: major sponsors such as Fidelity, Invesco and BlackRock are launching their own managed futures ETFs, signaling confidence that diversification benefits will resonate with investors facing elevated equity valuations, inflation concerns and geopolitical risk. As the market regime continues to shift, allocating a small portion of assets to systematic trend‑following futures could enhance portfolio resilience and liquidity, provided investors understand the tax implications of futures versus swaps and monitor expense ratios.

Overall, managed futures ETFs are emerging as a pragmatic tool for modern asset allocation, offering a hedge‑fund‑grade strategy in a transparent, low‑cost vehicle. Their growth hinges on advisor education, investor patience, and the continued ability of quantitative models to capture multi‑month macro trends amid an unpredictable global environment.

Original Description

An increase in market volatility is driving ETF innovation around packaging ever-more complex strategies into single instruments. One example is the growth of strategies like managed futures. Dynamic Beta Investments founder and managing member Andrew Beer and NovaDius president Nate Geraci sit down with CNBC’s Dominic Chu to talk about how ETF investors are navigating the Iran war and other geopolitical tensions.