Diversifying With Managed-Futures Funds? Watch This Fund

Josh Charlson: American Beacon AHL Managed Futures Strategy has a little more than a two-year track record in Morningstar's managed-futures category, and it's a fund that's on our radar.

The fund is subadvised for American Beacon by Man AHL, a London-based firm with one of the largest alternative investment businesses in the industry with more than $78 billion in assets and a 25-year track record in systematic strategies. The strategy follows a pure systematic trend-following approach, which means that its models profit from sustained trends in rising or falling markets. The fund can go long or short across four asset classes: equities, fixed income, commodities, and currencies. Managed-futures funds have proven to be one of the best diversifiers to a traditional portfolio.

We like the experience and resources behind this fund's team. The lead portfolio managers on the fund are Matthew Saragaison and Russell Korgoankar. Sargaison is the CIO of Man AHL and has served as its chief risk officer. Korgonakar has been with the firm since 2001 and was named head of portfolio management in 2011. They are supported by 88 investment professionals who specialize in trading strategies and model development.

The mutual fund is a carve-out from the firm's flagship private strategy. One difference from the flagship fund is that this fund trades the 80 most liquid markets out of 150 used in the flagship CTA. It targets a volatility level of 10%, which is fairly typical for a managed-futures fund. The fund's fees are average to above average, depending on the share class, but they do not contain any hidden performance fees, which has been an unfortunate trend in some other managed-futures funds.

For investors interested in the diversification potential of managed-futures funds, this is one to keep an eye on.