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Could Managed Futures Offer a New Twist on the Classic 60/40 Portfolio?

An investment expert says managed futures funds may help balance stocks when markets are bumpy, though another expert says bonds still have a role.

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Andrew Beer, co-founder and managing member of DBi, believes managed futures could offer a modern twist to the traditional 60/40 portfolio, which mixes 60% stocks with 40% bonds. He shared his views with CNBC's "ETF Edge" this week.

Beer said bonds have been dead money for the entire decade, meaning they have not made much profit for investors over that time. He contends that managed futures could counterbalance stocks better than bonds during volatile periods, when prices move up and down sharply.

Market volatility has been moving higher due to worries surrounding debt and the artificial intelligence trade. Managed futures ETFs, which are exchange-traded funds, can go long and short across global markets. Going long means taking a position that prices will rise, while going short means taking a position that prices will fall.

Managed futures strategies were historically only available to hedge funds, which are investment funds usually open to wealthy or professional investors. Beer helps manage the iMGP DBi Managed Futures Strategy ETF, known as DBMF. According to the firm's website, DBMF replicates the performance of leading managed futures hedge funds in a low-cost, liquid ETF, meaning it can be bought and sold easily.

As of Thursday's close, DBMF was up almost 19% so far this year, according to FactSet data.

Nate Geraci, president of NovaDius Wealth Management and an ETF Institute co-founder, takes a different view. He says bonds still have a place in diversifying a portfolio, which means spreading money across different types of investments. Geraci says alternatives fit in the sleeve of a well-diversified portfolio that includes stocks and bonds, meaning they can be one part of a larger mix.

Managed futures funds can outperform during volatile markets, but they may also have periods of underperformance, when they do worse than others.

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Source: CNBC. Spotted a mistake? Tell us.