Managed Futures: A Diversification Tool for Volatile Markets

Remember 2022? Your stock portfolio dropped 18%. Your bond holdings, the safe part that was supposed to protect you, lost 13%. Even international stocks couldn't escape the chaos. Meanwhile, your neighbor mentioned their "managed futures fund" had gone up 24%. If you felt confused and frustrated, you weren't alone. That year taught most investors a hard lesson – their traditional portfolios weren't as diversified as they thought.

This same story happens during every big crisis. The investments we count on to balance each other suddenly fall together. It happened in 2008 when stocks and real estate crashed at the same time. It happened again in 2022 when inflation sent both stocks and bonds tumbling. These moments show an uncomfortable truth about investing today. Traditional diversification sometimes falls flat right when you need it most.

The Problem Hiding in Your Portfolio

Most investors follow the classic 60/40 portfolio split. That's 60% stocks for growth and 40% bonds for stability. This worked great for decades. Bonds usually went up when stocks fell, creating a natural layer of protection. But something changed. Recently, we've seen several times where both dropped together.

Failing Familiar Safeguards

The problem goes deeper than bad timing. Traditional portfolios assume stocks and bonds will preserve their same historical relationship. When inflation jumps or economic conditions shift dramatically, this relationship bursts. Your balanced portfolio becomes unbalanced at the worst moment.

Think about what happens in a real crisis. Stock markets drop as investors panic. You might expect bonds to help, but if inflation drives the crisis, bonds suffer too, as interest rates climb. Real estate often follows stocks down during big shocks. Gold might come in handy, but it's surprisingly unreliable. In 2022, gold barely moved while inflation raged.

This leaves investors stuck. They need something that can actually make money from market chaos, not just lose less. They need an investment that works in a fundamentally different way. One that yields profits whether markets rise or fall. Enter managed futures.

How Managed Futures Work

Managed futures might sound complicated, but the basic idea is simple. These are professional investment strategies that trade futures contracts across many markets. Stocks, bonds, currencies, commodities - they trade them all. The key difference from regular investing is they can make money from falling prices just as easily as rising ones.

Here's how it works. Managed futures funds, usually run by commodity trading advisors or CTAs, use computer models to spot trends across global markets. When they find an upward trend, they buy. When they see a downward trend, they sell short. This flexibility means they don't depend on markets always going up.

Most managed futures strategies follow what's called a systematic trend-following approach. Computer algorithms analyze price data, looking for sustained movements. If oil prices start climbing steadily, the system buys oil futures. If government bonds begin falling consistently, it shorts bonds futures. The strategy tries to ride these trends until they reverse. The CFA Institute notes in their "Hedge Fund Strategies" report (2025) that this systematic approach removes emotional decisions from investing.

The real magic happens during crisis periods. When markets panic, they often move in one direction for extended periods. This creates exactly the kind of sustained trends that these systems capture. Research by Kathryn Kaminski in her 2019 work shows this creates "crisis alpha" - the ability to generate positive returns during severe market drops.

Proof From Past Crises

The numbers tell a compelling story. During major market crashes, managed futures have consistently delivered when everything else failed.

The 2008 Financial Crisis: Global stocks lost over half their value. Managed futures gained about 20%. The Morningstar Managed-Futures Category Handbook from 2011 documents that the average managed futures fund returned 19% in 2008. That was a year when almost every other investment lost money.

The 2022 Inflation Shock

This became managed futures' time to shine. Both stocks and bonds had their worst combined performance in decades. But managed futures strategies gained roughly 24% through October. 

COVID-19 Crash

During the pandemic's initial plunge, managed futures mostly preserved capital while stocks dropped 34% in weeks. They quickly shifted to buying bond futures and shorting stock futures. This helped them avoid the steep losses hitting other investments. AXS Investments' report "One Investment Strategy that Skipped the Quarantine" from 2020 shows how they adapted rapidly to changing conditions.

The pattern becomes clear. Managed futures tend to deliver their best performance right when you need help most. During sustained market crises, they don't just minimize losses. They can generate significant gains while everything else falls.

When markets become unpredictable, investors look for tools that can perform under pressure. Platforms like Maclear take this principle even further by offering exposure to impact-driven investments – while managing risk with advanced credit scoring models and diversified lending structures. By spreading risk across hundreds of borrowers, Maclear gives investors a chance to earn consistent returns, even when traditional markets struggle.

Smart Ways to Add Managed Futures

If managed futures make sense for your portfolio, here's how to approach them wisely.

1. Get the Size Right

Research from iM Global Partners suggests even a 5-10% allocation can significantly reduce portfolio losses during crisis years. Most advisors recommend keeping it between 5% and 20%. This provides meaningful protection without putting too much into one strategy.

Think of it like insurance for your house. You don't insure it for twice its value. Likewise, a modest managed futures allocation can provide substantial crisis protection without taking over your portfolio.

2. Pick Your Investment Wisely

The days when only wealthy investors could access managed futures through hedge funds are gone. Today, you have several good options.

ETFs are the easiest way in. Funds like iMGP DBi Managed Futures Strategy ETF (DBMF) offer exposure for around 0.85% in annual fees. They trade just like stocks and you can start with any amount. Then, therer are mutual funds. Companies like AQR and PIMCO offer managed futures mutual funds you can buy and sell every day. They cost more than ETFs, usually 1-2% per year, but that's still reasonable for this type of strategy.

In the form of direct CTA investment, larger investors can deal directly with a commodity trading advisor. This offers more customization but needs substantial money and expertise.

3. Know What You Own

All managed futures funds aren't the same. Some focus heavily on commodities. Others emphasize financial futures. Some use faster trading models while others follow longer trends. Review each fund's approach so that it matches your goals.

Pay attention to volatility targets, too. Some funds aim for bond-like volatility. Others target stock-like volatility with higher potential returns. Match this to how much risk you can handle.

4. Keep Your Expectations Realistic

Managed futures won't make you rich during bull markets. They often deliver modest returns during calm periods. Sometimes they barely beat cash. Their value shows up during crises and sustained trends.

This means you need patience. The strategy might underperform for years during quiet markets. Then suddenly prove its worth during the next crisis. Investors who give up during calm periods often miss the exact payoff they wanted.

5. Understand the Downsides

Every investment has drawbacks. Managed futures struggle in choppy markets where prices jump around without clear trends. Fees run higher than regular index funds. The strategy's complexity can make it harder to understand and stick with.

Tax treatment can get more complex, too. Direct CTA investments might issue K-1 forms. ETF and mutual fund versions usually avoid this issue, but check with your tax advisor.

Making Your Decision

Managed futures aren't for everyone. If you're comfortable with traditional portfolios and can handle the occasional bear market, you might not need them. But if recent market shocks have you wondering whether your portfolio can handle anything, they deserve serious consideration.

Think of managed futures as hiring a specialist for your investment team. Someone whose job is finding opportunities in chaos. During calm markets, they contribute modestly. During crises, they can save your portfolio from big losses while potentially making gains.

The best time to add crisis protection isn't during a crisis. It's before one hits. With uncertainty seeming like the only certainty these days, having a strategy that thrives on volatility instead of fearing it could make all the difference.

Taking Action

Start by learning about managed futures strategies. Find funds that fit your comfort level and goals. Talk with a financial advisor who knows alternative investments so that you land on the right mix for your situation.

Keep in mind, this isn’t about redoing your whole portfolio overnight. It’s about adding a piece that helps you face whatever the markets send your way. The world shifts fast. That kind of flexibility isn’t just wise. It’s what keeps your money safe and growing over time.

Ready to add more resilience to your portfolio? Maclear lets you support real-world businesses through a Swiss crowdlending model that’s built for transparency, impact, and reliable returns – even in uncertain markets.