First Trust launches active managed futures strategy ETF

Aug 7th, 2013 | By | Category: Alternatives / Multi-Asset

First Trust, a global provider of exchange-traded funds (ETFs), has launched an actively managed ETF providing investors with access to a managed futures strategy.

First Trust launches active managed futures strategy ETF

First Trust launches active managed futures strategy ETF

The fund, the First Trust Morningstar Managed Futures Strategy ETF (FMF), which has been listed on the NYSE Arca, seeks to provide investors with positive returns and to exceed the performance of the Morningstar Diversified Futures Index, the fund’s benchmark.

The fund provides exposure to commodities, currencies, and equities through a long, short or flat futures strategy. It seeks to achieve positive returns that are not directly correlated to broad market equity or fixed income returns.

Managed futures are an alternative asset class that may benefit from both rising and falling price trends. Managed futures have been successfully implemented by institutional investors for nearly three decades, but have been typically offered in hedge funds or private accounts until recently.

The ETF structure makes the strategy more accessible to a wider group of investors, providing a cost-effective way to invest in managed futures in addition to offering daily liquidity and full transparency to holdings and pricing.

John Gambla, CFA and Senior Portfolio Manager of the fund, said: “Managed futures strategies have historically had low correlation to stocks, bonds, and other investment strategies, moderate volatility, lower drawdowns than equities and positive returns in a variety of economic environments. Consequently, managed futures can be a potentially powerful diversifier to an investment portfolio.”

Sanjay Arya, senior vice president of Morningstar Indexes, said: “We are excited that First Trust licensed our diversified futures index for an exchange-traded fund. Since launching our first futures-based indexes in 2007, we have seen growing investor demand for liquid, transparent, rules-based strategies. Designed to take both long and short positions, the Morningstar Diversified Futures Index provides the flexibility to potentially capture both upward and downward movements in price.”

In addition to John Gambla, Rob A. Guttschow, CFA, will also serve as Senior Portfolio Manager. The two will primarily be responsible for daily investment decisions under the direction of an investment Committee which includes six other individuals with extensive investment experience.

The fund has an expense ratio of 0.95%.

The fund will likely be pitched again the NYSE-listed WisdomTree Managed Futures Strategy ETF (WDTI), or the Toronto-listed iShares Managed Futures Index (CMF) and Horizons Auspice Managed Futures Index ETF (HMF).

European investors looking for a similar exposure could consider the UBS-ETF HFRX Macro CTA Index SF (UIQ5) or the RBS Market Access CTA Index ETF (M9S3), both listed on the Deutsche Börse.

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