What they are
Managed futures funds trade futures on commodities, currencies, bonds and stock indexes, going long what is trending up and short what is trending down. The approach is also called trend following or CTA investing. See Momentum investing.
Why investors hold them
They can profit when stocks and bonds both fall, if those falls form clear trends. In 2022, when stocks and bonds fell together and hurt HFEA, KMLM rose over 30%.
Common ETFs
| Fund | Approach |
|---|---|
| KMLM | Follows the KFA MLM Index: trends in commodities, currencies and bonds |
| DBMF | Replicates the average holdings of large managed futures hedge funds |
| CTA | Actively managed trend and carry |
Taxes
Many managed futures ETFs are structured to issue a 1099, but some commodity funds issue a Schedule K-1. Check before buying. See K-1 vs 1099 funds.
Risks
Trend followers lose money in choppy, trendless markets and can lag for years in calm bull markets. Their value is as a diversifier, not a return engine.
See also
- Momentum investing What price momentum is, the evidence that recent winners tend to keep winning for a while, how momentum is measured, and its crash risk.
- HFEA (Hedgefundie's Excellent Adventure) HFEA explained: the 55% UPRO and 45% TMF leveraged risk parity portfolio, its stock-bond thesis, backtests, what happened in 2022, and its variants.
- K-1 vs 1099 funds Why some ETFs send a Schedule K-1 instead of a 1099, how fund structure decides the tax form and rates, and which fund types to check before buying.
- Inverse ETFs How inverse ETFs like SH and SQQQ aim to rise when markets fall, why they decay over time, and why they are poor long-term hedges.
Last updated September 30, 2026. Education only, not investment advice.