Shrouded in mystery and even more misunderstanding, hedge funds have always been very limited for the average investor. Whether for regulatory reasons or because of high capital requirements. But with the revolution started by ETFs, they are now available to the masses. Today, with literally a few dozen dollars in your pocket, you can invest in the same things as hedge funds.
The hedge fund industry is burdened with one big sin: high management costs – just like in classic investment funds. This is probably the main source of their numerous failures. But something has been changing here for years, paradoxically partly thanks to the ongoing passive revolution (i.e.: index products). Management costs are falling, and according to Morningstar, the current average management cost among hedge funds is approximately 1.6% per year. Yes – it is still a lot if compared to passive stock ETFs, where the cost may be lower than 0.1% per year.
For several years, strategies implemented by hedge funds in the ETF package have been beginning to appear – the so-called managed futures ETFs. Here, management costs dropped below 1% per year.
Today, I invite you to an interview with Andrew Beer – a man with 30 years of experience in the hedge fund industry. Some people even call him the “John Bogle of hedge funds” because he offers a very cheap (for this class of strategy) ETF.
In this episode
- What is a managed futures strategy?
- Can managed futures be considered a separate asset class?
- Can managed futures be used as a stand-alone strategy or rather as a portfolio complement?
- Assumptions behind the DBMF ETF.
- How does an ETF replicate a managed futures strategy in practice?
- What are the risks of replicating managed futures strategies by ETFs?
- What distinguishes DBMF from the competition?
- Are there any plans for an ETF of this type in Europe?
Andrew D. Beer has over twenty-five years of experience in the hedge fund industry. Over the past decade, Mr. Beer’s singular focus has been to identify strategies to match or outperform portfolios of leading hedge funds with low fees, daily liquidity and less downside risk. He serves as the Managing Member at Dynamic Beta investments LLC, a pioneer in hedge fund replication, and is co-Portfolio Manager of the firm’s investment strategies. Mr. Beer received his master’s in business administration degree as a Baker Scholar from Harvard Business School, and his Bachelor of Arts degree, magna cum laude, from Harvard College.
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