Key Takeaways
- • The KraneShares Mount Lucas Managed Futures Index Strategy (KMLM) index gained 13.3% in Q3 2026, bringing year-to-date returns to 20.3% and trailing 12-month returns to 22.2%, per KraneShares' quarterly review.
- • Commodities contributed +6.6% and global fixed income +5.2%, while currency positions detracted 0.1%; interest income added 1.1%.
- • The Index's global fixed income short expanded from net short 81% to net short 123%, mostly in the last week of July, as the U.S. 10-year Treasury yield closed the quarter at 5.29%.
- • The Federal Reserve raised rates 25 bps to 4.00% on September 16, its first hike since 2023, and the Bank of Japan lifted its policy rate to 1.25% two days later.
- • Commodity exposure rose from net long 16% to net long 36%, with energy as the main contributor; currency exposure moved from net short 59% to net short 39%.
Summary
The KraneShares Mount Lucas Managed Futures Index Strategy ETF (KMLM) tracks the Mount Lucas Management KFA MLM Index, which finished Q3 2026 up 13.3%, according to KraneShares' quarterly review. Commodities contributed 6.6% and global fixed income 5.2%, while currencies subtracted 0.1% and interest income added 1.1%. Over the twelve months ending September 2026 the Index returned 22.2%, and year-to-date it is up 20.3%. The review notes that index returns do not reflect management fees, transaction costs, or expenses.
The quarter was shaped by an energy-driven inflation shock. The interim ceasefire with Iran collapsed on July 8, and WTI crude, which ended June near $69, rose above $92 in late July and above $95 in mid-September after a drone strike shut Saudi Arabia's East-West pipeline. Prices finished the quarter near $88 after the pipeline returned to service and G7 governments agreed to a reserve release. Central banks moved from discussing hikes to implementing them. The Fed held in July on a 9-3 vote, with three dissents favoring a hike. On September 16 the FOMC voted 12-0 to raise rates 25 bps to 4.00%, with the dot plot pointing to one more hike this year. The U.S. 10-year yield closed the quarter at 5.29%, above its 2007 closing high and the highest since 2002, which the review attributes to energy-driven inflation and heavy Treasury and AI-related issuance.
The Index's positioning reflected a view that supply-driven inflation would force central banks to tighten. Commodity exposure rose from net long 16% to net long 36%. Energy positions in crude oil, heating oil, and unleaded gas were profitable in every month, and the top three commodity contributors were heating oil, unleaded gas, and crude oil. Corn, sugar, and live cattle were the largest detractors. Gold was a frustrating position: the Index was roughly 7% short through early August, saw gold rally about 14% into late August, and was flat by September before rebuilding a roughly 6% short after the Fed hike. Global fixed income exposure moved from net short 81% to net short 123%, and all five markets contributed, led by the U.S. Ultra Ten Year, UK Long Gilts, and the Euro Bund.
Currency results were mixed. The Swiss franc, euro, Australian dollar, and Canadian dollar contributed, while the yen and British pound detracted. The yen short was the largest sector detractor after the July 31 intervention and a September rally toward 155, and the yen later weakened above 157 after the Fed hike. The review describes the dollar's Q3 move as a two-way contest between intervention and Bank of Japan hike expectations on one side and the Fed's hawkish turn on the other. Net short foreign currency exposure narrowed from 59% to 39%.
The review concludes that the Index is positioned for a repeat of 2022-style dynamics, with stocks still near highs. It notes that a possible wind-down of the conflict after the midterms remains uncertain, leaving the macro outlook sensitive to headlines.
The quarter was shaped by an energy-driven inflation shock. The interim ceasefire with Iran collapsed on July 8, and WTI crude, which ended June near $69, rose above $92 in late July and above $95 in mid-September after a drone strike shut Saudi Arabia's East-West pipeline. Prices finished the quarter near $88 after the pipeline returned to service and G7 governments agreed to a reserve release. Central banks moved from discussing hikes to implementing them. The Fed held in July on a 9-3 vote, with three dissents favoring a hike. On September 16 the FOMC voted 12-0 to raise rates 25 bps to 4.00%, with the dot plot pointing to one more hike this year. The U.S. 10-year yield closed the quarter at 5.29%, above its 2007 closing high and the highest since 2002, which the review attributes to energy-driven inflation and heavy Treasury and AI-related issuance.
The Index's positioning reflected a view that supply-driven inflation would force central banks to tighten. Commodity exposure rose from net long 16% to net long 36%. Energy positions in crude oil, heating oil, and unleaded gas were profitable in every month, and the top three commodity contributors were heating oil, unleaded gas, and crude oil. Corn, sugar, and live cattle were the largest detractors. Gold was a frustrating position: the Index was roughly 7% short through early August, saw gold rally about 14% into late August, and was flat by September before rebuilding a roughly 6% short after the Fed hike. Global fixed income exposure moved from net short 81% to net short 123%, and all five markets contributed, led by the U.S. Ultra Ten Year, UK Long Gilts, and the Euro Bund.
Currency results were mixed. The Swiss franc, euro, Australian dollar, and Canadian dollar contributed, while the yen and British pound detracted. The yen short was the largest sector detractor after the July 31 intervention and a September rally toward 155, and the yen later weakened above 157 after the Fed hike. The review describes the dollar's Q3 move as a two-way contest between intervention and Bank of Japan hike expectations on one side and the Fed's hawkish turn on the other. Net short foreign currency exposure narrowed from 59% to 39%.
The review concludes that the Index is positioned for a repeat of 2022-style dynamics, with stocks still near highs. It notes that a possible wind-down of the conflict after the midterms remains uncertain, leaving the macro outlook sensitive to headlines.
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