Investing August 30, 2026 0 Comments

The Shocking Truth Behind This Return That Will Leave Your Clients Speechless—Are You Ready to Explain It?

Ever been caught in that whirlwind of questions from eager newbies—those fresh associate advisers who won’t leave you alone with a simple “what do you think of this?” or “how about that?”? It’s a bit like hosting a never-ending Q&A session in your head, right? But honestly, it’s kind of refreshing to see others get their hands dirty in the nitty-gritty of investing. Because seriously, how often do you find people managing money who actually get the deep mechanics behind the investments they pitch and handle—and just as important, know when to say no? Now, toss in the question I keep hearing: “Should we add managed futures to our clients’ portfolios?” Ah, the classic conundrum! It’s not just about the shiny returns or how these funds dance alongside traditional assets like cash or equities. No, it’s about digging deeper—can these strategies be implemented well? Are they built on solid fundamentals or just smoke and mirrors? Investments aren’t magic tricks—they have their quirks, patterns, and yes, occasional stumbles. So, how do we truly figure out if managed futures are a dazzling new toy or a reliable toolkit? Let’s unravel this together, unpack what those black boxes might be up to, and see if we can chart a smarter path for client portfolios that goes beyond the surface. Ready to dive in? LEARN MORE

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We got these two rather new associate advisers (suspect they are reading this) that will keep asking me questions what do I think of this, what do I think of that.

You can ask questions but I like the fact that they shared their thoughts on why they think this is applicable for our clients and why that is not applicable for our clients. I do have folks that keep asking questions here and there, but I never had a chance to ask what they think about it.

Perhaps that’s my fault and I should ask more.

But its refreshing personally to have more folks really interested in the nuts and bolts of investing because… well its weird to be managing money and the people managing money to not have a culture about understanding about the investments we recommend & manage and also those that we do not.

I think I was asked (old man, insomnia so poor memory) if adding managed futures to our clients portfolio is a good idea.

I explain that there should be some empirical evidence over the returns, lack of correlation to the main asset classes like cash, property, equity and fixed income.

But you got to ask yourself if all the managed futures fund can have good implementations.

What does good implementations mean?

Well… if you have an investment idea, you got to ask if it is a scam. Most sound investments have fundamental drivers in that they can do well and don’t do well because of the fundamental drivers. Scam will show you no flaws (in exhibit).

If an investment have fundamental drivers, then does it only do well for certain conditions or that in a lot of different conditions? Or it doesn’t do well at all.

This is where we need empirical evidence to show that the numbers back it up.

There are many good ideas (sound economic fundamentals and empirical evidence) but they are either too difficult to implement & execute well consistently. Or it’s just hard to implement.

When I see Corey Hoffstein of Newfound Research have 22.5% of his personal wealth in Managed Futures, I take notice because that’s a significant enough commitment from someone research quant strategies for years (and now with his suite of Returns Stacking ETFs). You can read about it more here:

Tyler Lovingood (whoa power name) posted a infographic about the AUM vs Year to date and 3 year returns of some funds and ETFs in the Managed futures universe available to the US investors:

What you will notice is that some are funds with more significant AUM and some are less.

But there is a wide distribution of returns year-to-date but also 3-years.

Its not like a fund more AUM it is harder or easier (if that were the case you should see a more upward or downward sloping profile)

Now I know we would most likely put our clients in a model portfolio with a slice (allocation) of 5%, 10%, 15% or 20% in say one or a couple of these funds if we really implement them.

And you expect your clients to read off the performance as a performance of an overall portfolio.

But the reality is… your clients see all the underlying fund/ETF component individual returns.

If they see the performance as [40%] in a year, they are going to ask questions like why it did so well.

If the performance is [-15%], they are going to ask why it is not doing very well.

Firstly, you see this bunch of managed future funds, do you know what they are doing in that black box? Can you answer that question if you are trying to be a good adviser to deliver value?

It boils down sometimes to how much you are able to attribute the performance.

Secondly, what if we end up choosing a fund that looks to be the poor performing one compare to a great performing one? How would your clients feel if you go 1 year, 2 years then 3 years with the fund not performing so well? Do you switch?

KMLM, IMF, FFUT, CTA, AHLT, TFPN, MFUT, ASMF, ISMF, FMF, WTMF, HFMF, AHLIX, QMHIX, AQMIX, CSAIX all go long/short across commodities, currencies, rates, equity index futures based on technical signals.

If you understand what I wrote in that paragraph, you would know that the long term returns, whether close to the theory, greatly depends on execution and implementation.

While the long term returns of something can be low in correlation, are you confident enough to guide the client to stay invested in some years where equity does 25%, fixed income does 4% and managed futures implementation does -10%?

Clients have all sorts of questions.

There is a way to educate at the start, at certain points, and then over time to be able to manage their expectations. You can peel off the layers or aggregate to help them see their portfolio in different views.

But some stuff it really makes you question if its just bad execution or this -10% is the norm.

If you are selling a product, and you don’t want a long standing relationship with someone, then a year or 5-years of good historical returns is good.

But if your wish is to have someone for 10 years or more, then you got to ponder about the client experience.

On don’t know how often we got clients asking us roughly like why not just focus on US equities. Why have international. Why even Emerging Markets?

Some of these funds are easy to recommend and its easy for them to start and continue to put money in.

But it doesn’t mean it is easy for the investors (and advisers) to see them in “the right way”.

If you are someone who is trying to process this… many people see performances, or evaluate things in a snapshot. They think that the world is going to be “like this” from this point forward.

What’s tough is understanding the behavior of investments, and how humans would react to them in different threads.

And this explains why sometimes our portfolios does not always look the best on paper.

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