Behind the Ticker: KMLM & Mount Lucas Management

Why It Matters

KML provides institutional investors a liquid, uncorrelated hedge that monetizes diversification during market turmoil, enhancing portfolio resilience and advisor alpha.

Key Takeaways

• Mount Lucas originated from Commodities Corp, pioneering managed futures since 1986.
• KML ETF tracks 1988 MLM index, using trend‑following across 22 futures.
• Managed futures thrive in volatile markets, offering low correlation to stocks.
• Liquidity during crises makes KML a valuable rebalancing tool for advisors.
• Equity index futures are excluded to preserve pure commodity‑currency‑bond exposure.

Summary

The interview spotlights Mount Lucas Management’s evolution from its 1986 spin‑out of Commodities Corp to a leading managed‑futures specialist, and introduces its flagship ETF, KML, which mirrors the firm’s original 1988 MLM index.\n\nKey insights include the firm’s focus on systematic trend‑following across 22 highly liquid futures contracts, the rationale that managed futures capture a durable risk premium by assuming price risk that businesses hedge, and the observation that performance spikes during market stress—2022 and the 2008 crisis being prime examples.\n\nNotable moments feature the early Kodak CIO’s demand for a price‑based benchmark, the firm’s decision to exclude equity index futures to maintain pure commodity‑currency‑bond exposure, and Jerry’s emphasis on liquidity as “alpha” for advisors, enabling timely rebalancing and compounding benefits.\n\nFor investors, KML offers a low‑correlation, crisis‑resilient layer that can be liquidly accessed when equity and bond markets falter, making it a strategic defensive‑offensive tool in diversified portfolios.

Original Description

What if the real alpha in managed futures isn't the strategy — it's the liquidity?

Jerry Prior, CIO of Managed Futures Strategies and COO at Mount Lucas Management, joins Brad Roth on Behind the Ticker to break down one of the most misunderstood asset classes in portfolio construction: managed futures.

Mount Lucas has been running managed futures strategies since 1986, and their MLM Index, the basis for the KMLM ETF, has remained virtually unchanged since 1988. In an industry obsessed with optimization, Jerry makes a compelling case for why that's a strength, not a weakness.

Highlights from this episode:

• Why futures markets exist at all, and the economic risk transfer that drives returns

• Why trend following works best when everything else is falling apart

• The deliberate decision to exclude equity index futures from KMLM

• How volatility-based sector weighting works (and why they haven't changed it since 2005)

• Why vol-scaling improves Sharpe ratios but quietly kills diversification potential

• How 2022 played out in real time and why the 60/40 portfolio can no longer rely on bonds as a crisis buffer

• How the fund's annual distribution works and what investors should expect

🔗 RESOURCES

Mount Lucas Management: www.mtlucas.com

KMLM ETF: www.kraneshares.com

Listen on:

Spotify (https://open.spotify.com/episode/64FmrsTRKaLI4x73J4YqGW)

Apple Podcasts (https://podcasts.apple.com/us/podcast/a-forty-year-old-index-that-still-outperforms-in/id1682702118)

Or any of your preferred podcast platforms

📌 ABOUT BEHIND THE TICKER

Behind the Ticker goes deep with the portfolio managers, strategists, and fund builders behind today's most interesting ETFs. New episodes every week.

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