Andrew Beer, co-founder and managing member of DBi, argues that traditional bonds have been "dead money" for the entire decade and suggests investors consider managed futures as a superior hedge to equities. Speaking on CNBC's "ETF Edge," Beer contended that the tactical nature of managed futures allows portfolios to remain nimble during periods of rising volatility driven by concerns over debt and the artificial intelligence trade. He emphasized that managed futures exchange-traded funds can go long and short across global markets, offering low correlation to both stocks and bonds while performing well in crises.
Beer helps manage the iMGP DBi Managed Futures Strategy ETF (DBMF), which replicates the performance of leading managed futures hedge funds within a liquid, low-cost structure. As of Thursday's close, the fund was up almost 19% year-to-date according to FactSet data. Beer described the current environment as an "existential crisis" for strategic asset allocation, particularly the traditional 60/40 portfolio model, noting he does not allocate 40% to assets that fail to add value to the rest of his portfolio.
However, Nate Geraci, president of NovaDius Wealth Management and co-founder of the ETF Institute, cautioned against viewing managed futures as a complete replacement for bonds. Geraci identified fixed income as the most challenging area in investing but maintained that alternatives fit best within a diversified sleeve alongside stocks and bonds rather than displacing them entirely. He advised investors to understand how alternative strategies interact with broader portfolios, noting that while managed futures may outperform during volatility, they also experience periods of underperformance requiring long-term patience.
The debate between Beer and Geraci highlights a structural tension in modern portfolio construction: the diminishing efficacy of traditional safe-havens versus the operational complexity of tactical alternatives. Beer’s assertion reflects a growing sentiment among institutional allocators that static bond allocations no longer provide adequate risk mitigation in a regime characterized by higher volatility and correlated shocks from AI-driven market dynamics. By positioning managed futures as a dynamic hedge capable of shorting global markets, DBi challenges the passive assumption that diversification requires only uncorrelated asset classes, instead advocating for active, cross-asset flexibility.
Geraci’s counterpoint underscores the practical risks associated with adopting such strategies. While managed futures offer theoretical advantages in crisis scenarios, their implementation introduces significant behavioral and analytical hurdles for retail and institutional investors alike. The requirement to tolerate underperformance during calm markets tests investor discipline, potentially leading to premature exits that negate the strategy’s benefits. This divergence suggests that while the industry is exploring new hedging mechanisms, the transition away from the 60/40 model remains incomplete, with bonds retaining a role despite their reduced historical appeal.
