Key Takeaways
- • Mount Lucas Management launched KMLM (KraneShares Mount Lucas Managed Futures Index Strategy ETF) in 2020, providing institutional and retail investors access to the firm's flagship managed futures strategy through an ETF wrapper tracking 22 liquid futures contracts across commodities, currencies, and fixed income.
- • The MLM Index, which underpins KMLM, has remained largely unchanged since its creation in 1988—designed to systematically capture the risk premium from owning price risk across futures markets where commercial hedgers transfer operational risk (commodity prices, interest rates, FX, input/output costs).
- • Jerry Prior, CIO of Managed Futures Strategies and COO of Mount Lucas Management, emphasized that managed futures extend well beyond crisis-market performance, with alpha opportunities emerging from liquidity provision and the structural economics of hedging demand in commodity and derivative markets.
- • Mount Lucas Management traces its heritage to Commodities Corp (spun out in 1986) and has operated managed futures and global macro strategies for institutional investors for nearly four decades, with Prior serving the firm for approximately 30 years.
Summary
Mount Lucas Management brought its institutional managed futures strategy to the retail and institutional ETF market in 2020 with the launch of KMLM (KraneShares Mount Lucas Managed Futures Index Strategy ETF), providing investors access to systematic exposure across 22 liquid futures contracts traded on U.S. and foreign exchanges. The fund targets commodity, currency, and global fixed income futures as its core investment universe.
The intellectual foundation of KMLM rests on the MLM Index, created in 1988 and designed around a core economic principle: futures markets exist primarily to allow commercial enterprises—farmers, manufacturers, energy producers—to hedge operational risks tied to input and output prices, interest rates, and foreign exchange exposure. Mount Lucas and the broader managed futures industry systematically assume this price risk in exchange for a risk premium, sitting on the opposite side of the hedging demand curve. Jerry Prior, who has led the firm's managed futures strategies for nearly 30 years as CIO and COO, notes that this index structure has remained fundamentally unchanged across four decades, reflecting confidence in its core architecture.
A central theme in Mount Lucas's positioning is that managed futures deliver value beyond traditional crisis-market narratives. While 2022 highlighted vulnerabilities in traditional 60/40 portfolios during inflationary and volatile periods, Prior's framing suggests the strategy's alpha opportunity extends to liquidity provision—capturing returns from the systematic ownership of price risk as commercial hedgers continuously roll contracts and adjust positions. This distinction positions KMLM as differentiated from other managed futures ETFs that may emphasize trend-following or volatility-driven mechanics.
Mount Lucas's heritage underscores institutional credibility: the firm originated from Commodities Corp in 1986 and has maintained continuous operations in managed futures and global macro strategies for institutional clients. The transition to an ETF vehicle represents a modernization of distribution rather than a fundamental shift in strategy, making the firm's 40-year index methodology accessible to a broader investor base while preserving the systematic, rules-based approach that has defined its institutional practice.
The intellectual foundation of KMLM rests on the MLM Index, created in 1988 and designed around a core economic principle: futures markets exist primarily to allow commercial enterprises—farmers, manufacturers, energy producers—to hedge operational risks tied to input and output prices, interest rates, and foreign exchange exposure. Mount Lucas and the broader managed futures industry systematically assume this price risk in exchange for a risk premium, sitting on the opposite side of the hedging demand curve. Jerry Prior, who has led the firm's managed futures strategies for nearly 30 years as CIO and COO, notes that this index structure has remained fundamentally unchanged across four decades, reflecting confidence in its core architecture.
A central theme in Mount Lucas's positioning is that managed futures deliver value beyond traditional crisis-market narratives. While 2022 highlighted vulnerabilities in traditional 60/40 portfolios during inflationary and volatile periods, Prior's framing suggests the strategy's alpha opportunity extends to liquidity provision—capturing returns from the systematic ownership of price risk as commercial hedgers continuously roll contracts and adjust positions. This distinction positions KMLM as differentiated from other managed futures ETFs that may emphasize trend-following or volatility-driven mechanics.
Mount Lucas's heritage underscores institutional credibility: the firm originated from Commodities Corp in 1986 and has maintained continuous operations in managed futures and global macro strategies for institutional clients. The transition to an ETF vehicle represents a modernization of distribution rather than a fundamental shift in strategy, making the firm's 40-year index methodology accessible to a broader investor base while preserving the systematic, rules-based approach that has defined its institutional practice.
Go deeper than the headline
Research every firm in this story, track the ones that matter and get the daily briefing — free for 7 days.