Key Takeaways
- • KMLM achieved a three-year track record in December 2023, delivering +41.84% cumulative returns versus +31.25% for equities and -11.88% for bonds over the same period, demonstrating outperformance and uncorrelated behavior during a volatile period.
- • Managed futures strategies posted +30.52% returns in 2022 when equities fell -18.13% and bonds declined -13.01%, highlighting the diversification and risk mitigation benefits during market dislocations that concern institutional investors heading into 2024.
- • KMLM tracks the KFA Mount Lucas Managed Futures Index, which represents a continuation of Mount Lucas Management's MLM Index™ first published in 1988, providing investors access to 35+ years of live index history for validating the strategy's long-term risk-reduction potential.
- • The fund dynamically adapts to market conditions across commodity, currency, and global fixed income futures, addressing current investor concerns about narrow equity rallies and uncertain interest rate trajectories entering 2024.
Summary
KraneShares and Mount Lucas Management announced that the KFA Mount Lucas Managed Futures Index ETF (ticker: KMLM) achieved a significant three-year track record milestone in December 2023. The milestone is noteworthy given the fund's ability to deliver consistent uncorrelated returns in an environment where traditional asset classes have diverged sharply.
Since inception, KMLM has returned +41.84% compared to +31.25% for equities and -11.88% for bonds over the identical three-year period. The performance differential is particularly evident in 2022, when the strategy's ability to hold both long and short positions across futures markets proved valuable. During that year, managed futures as measured by KMLM gained +30.52% while equities declined -18.13% and bonds fell -13.01%. This stark contrast underscores the diversification benefits that have driven renewed institutional interest in managed futures strategies during periods of elevated uncertainty.
KMLM's underlying index, the KFA MLM Index, represents a continuation of Mount Lucas Management's MLM Index™, which was first published in 1988 to measure returns from passive investment in a basket of long and short futures contracts. The 35-year pedigree provides institutional investors with extensive live index history to evaluate the strategy's effectiveness at reducing portfolio risk and drawdown when integrated with traditional 60/40 stock-bond allocations. The fund implements this strategy by investing across commodity, currency, and global fixed income futures, positioning itself to adapt to shifting market regimes.
As institutional investors prepare portfolios for 2024 amid persistent market uncertainty—particularly concerning the concentration of the equity rally and ambiguous interest rate trajectories—managed futures strategies like KMLM are increasingly recognized for their risk mitigation potential. The fund's low correlation with traditional equity and fixed income markets positions it as a distinct complement to conventional portfolio construction, according to KraneShares' framing of the fund's value proposition within its peer set.
Since inception, KMLM has returned +41.84% compared to +31.25% for equities and -11.88% for bonds over the identical three-year period. The performance differential is particularly evident in 2022, when the strategy's ability to hold both long and short positions across futures markets proved valuable. During that year, managed futures as measured by KMLM gained +30.52% while equities declined -18.13% and bonds fell -13.01%. This stark contrast underscores the diversification benefits that have driven renewed institutional interest in managed futures strategies during periods of elevated uncertainty.
KMLM's underlying index, the KFA MLM Index, represents a continuation of Mount Lucas Management's MLM Index™, which was first published in 1988 to measure returns from passive investment in a basket of long and short futures contracts. The 35-year pedigree provides institutional investors with extensive live index history to evaluate the strategy's effectiveness at reducing portfolio risk and drawdown when integrated with traditional 60/40 stock-bond allocations. The fund implements this strategy by investing across commodity, currency, and global fixed income futures, positioning itself to adapt to shifting market regimes.
As institutional investors prepare portfolios for 2024 amid persistent market uncertainty—particularly concerning the concentration of the equity rally and ambiguous interest rate trajectories—managed futures strategies like KMLM are increasingly recognized for their risk mitigation potential. The fund's low correlation with traditional equity and fixed income markets positions it as a distinct complement to conventional portfolio construction, according to KraneShares' framing of the fund's value proposition within its peer set.
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