cies across geographic regions . The aim is to deliver a smoother ride during the market ’ s ups and downs , and to be competitive with risk assets in strong markets .
“ We won ’ t outperform pure equity portfolios in a bull market , but we don ’ t expect to be left too far behind during the good times ,” he states . “ And our job is to also deliver during the bad times . The goal is to have no down years , but we can ’ t promise that because obviously we ’ re at the mercy of the markets . But we haven ’ t had a down year during the five years we ’ ve been in business .
“ It ’ s a real simple triangle of T-bills , equities and managed futures ,” he says about his fund ’ s strategy .
Effectively Alternative
But it ’ s not an equilateral triangle . Roughly half of the fund ’ s portfolio consists of a changing mix of short-term Treasury bills and low-cost , index-based exchangetraded funds with exposure to global equity markets . The T-bills act as a buffer when equities tumble , and equities traditionally have been the traditional go-to source for the fund ’ s capital appreciation .
The other half of the portfolio comprises managed futures contracts that can access roughly 75 commodity , currency , equity , and bond markets . These liquid , low-cost exchange-traded contracts can take long or short positions .
“ We use effective alternative investments inside a traditional portfolio ,” Crittenden says . “ It ’ s kind of a one-stop shop for a total portfolio solution , but we don ’ t expect people to put all of their money into one fund .”
Portfolio Statistics
Number Of Positions * 14 Average Mkt . Cap ** $ 145.6B P / E Ratio 18.68x Std . Dev Fund / Benchmark 8.76 / 16.66 Turnover Ratio ** 8 % Net Expense Ratio 1.26 %
* Non-futures contracts . ** Based on the long position of the equity holdings . Portfolio stats as of 7 / 31 / 24 . Standard deviation ( three-year period ) versus the Morningstar Global Target Market Exposure NR USD Index . Turnover as of 10 / 31 / 23 . Sources : Standpoint Asset Management and Morningstar .
Manager Eric Crittenden Age 52
Crittenden defines “ effective ” alternative investments as any scalable asset class with at least 30 to 40 years of data and a track record of delivering constructive results in bear markets . He posits that only three such assets make the grade — and maybe four if you broaden the definition . He argues that managed futures is the best of the lot .
“ Managed futures has been the best diversifier during the past 50 years ,” he posits . “ It has done the most to buoy a stock-heavy or 60-40 portfolio than any other asset class . Yes , it can be challenging at times , but if you look at the numbers , managed futures have been the best diversifier by my calculations .”
The other three asset classes on his list include short-term Treasurys of less than one-year duration , gold and master limited partnerships .
Blind Taste Test
Managed futures comprise a portfolio of futures contracts put together by a financial manager known as a commodity trading advisor . CTAs can invest in futures contracts consisting of stocks , bonds , commodities and foreign currencies with the goal to provide diversification and reduced volatility , along with upside potential . The first managed futures fund was created in 1949 .
But CTA-operated managed futures programs can be expensive , and include management fees as high as 3 %, along with a performance fee that could gobble
Professional Background He is Standpoint Asset Management ’ s co-founder , chief investment officer and portfolio manager . He was previously the co-founder and portfolio manager at Longboard Asset Management . Before that he was research director at Blackstar Funds , where he focused on macro trends and long / short investing .
Outside Interests Swimming 30 laps every day after the market closes . He also likes reading about cognitive psychology and cognitive biases , and he ’ s recently taken up cooking .
up as much as 20 % of an investor ’ s profits .
In a YouTube video , Crittenden describes a “ blind taste test ” that he devised for investors in which he presents them with the annual return , annual volatility and worst-year performance of five unidentified asset classes : stocks ; bonds ; managed futures ; balanced strategies ( of stocks and bonds ); and all-weather strategies ( of stocks and managed futures ). They were asked to identify which asset classes they gravitated toward and which ones they shied away from .
“ When I forced people to be objective , they almost always chose the stocks and managed futures [ category ],” he said in the video . His takeaway was that managed futures standing alone have been disappointing , but in the big picture they have been a more effective diversifier than bonds .
His taste test covered the period from 2000 through 2019 . It would be instructive to see results that included the Covid year of 2020 , as well as 2022 when both stocks and bonds tanked . But given the fund ’ s performance during its nearly fiveyear run , one could surmise that Crittenden ’ s basic contention would still hold up .
“ Covid was good for us in a sense that we were able to demonstrate our diversification benefit and not go down 35 % like everyone else ,” he says . “ The equity part of our portfolio benefited after Covid during a period when managed futures were left behind . So we ’ ve had a good environment to showcase what we can do .”
The Standpoint Multi-Asset Fund ’ s in-
48 | FINANCIAL ADVISOR MAGAZINE | OCTOBER 2024 WWW . FA-MAG . COM