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Unlimited HFMF Managed Futures ETF (HFMF)

The Unlimited HFMF Managed Futures ETF (ticker HFMF) is a fund that watches for big moves in global markets and positions itself to ride them. It trades dozens of commodity, currency, bond, and equity futures contracts using mechanical rules that look for uptrends and downtrends. When oil is rising, the fund is long. When copper is falling, the fund is short. The logic is simple: trends exist, and they last long enough to capture if you buy them early and hold them.

What are managed futures exactly?

Managed futures is a style of investing that sits apart from conventional stock and bond portfolios. Instead of buying and holding equities because you believe in the companies, or bonds because you expect stable income, a managed-futures strategy buys and sells futures contracts based on momentum and trend signals. A futures contract is a standardised agreement to buy or sell a commodity, currency, or financial instrument at a set price on a set date in the future. Futures are highly liquid, trade on exchanges, and can be bought or sold in seconds.

The intellectual foundation is that large price moves in commodities, currencies, and interest rates often develop slowly, persist for months or years, and eventually reverse. A fund that can detect when a trend is forming — whether up or down — and ride that trend until it breaks can generate positive returns regardless of whether the trend is in oil, wheat, the euro, or Japanese government bonds. The diversity of futures markets means a single portfolio can be long some trends and short others simultaneously, capturing opportunities across the entire landscape of global markets.

This differs from traditional equity investing, where the baseline is long. You own stocks; you hope they rise. A managed-futures strategy is agnostic about direction. If soybeans are in an uptrend, go long; if they are in a downtrend, go short. The fund does not care which. It only cares about catching the trend.

Most managed-futures strategies use systematic rules, often variations of the same basic formula: calculate the momentum of an asset (the direction and speed of recent price movement) and take a position in the direction of that momentum. Buy if the price is making new highs relative to a trailing average; sell if it is making new lows. The rules are mechanical — they do not require a human to forecast whether oil will rise or fall. They only require that the human (or the programmer) has correctly identified that trends exist and are exploitable.

The time horizons for detecting trends vary. Some strategies look at momentum over the past few days (short-term); others over weeks or months (medium-term); others over years (long-term). A diversified managed-futures fund typically blends strategies across multiple time horizons, creating a portfolio that responds to trends at different scales. A short-term momentum signal might suggest being long tech stocks; a longer-term signal might suggest being short bonds. Both can be held simultaneously.

The rules also incorporate position sizing and risk management. A single trend-following signal should not lead to an outsized bet. Instead, the portfolio is constructed so that no single market or trend can blow up the fund. Positions are sized to limit volatility, and stops are placed to exit if a trend reverses sharply.

The fundamental question is: why would prices move in predictable, exploitable trends rather than randomly? The answer lies in human behaviour and market structure. Investors often move slowly into new positions, especially large ones. Hedge funds that detect a macro shift do not suddenly put on their entire position; they accumulate gradually. Trend followers detect that slow, steady buying and position themselves early. By the time the trend is obvious, the fund has already been riding it for months. Reversal usually comes when the last buyer has entered, and early sellers begin to exit — a process that also happens gradually.

Additionally, many institutional investors are forced to hold positions for long periods and are not allowed to actively trade. They own a basket of stocks or bonds for strategic or policy reasons and hold it even as the market reveals information that should change valuations. This creates predictable drifts in supply and demand that create and sustain trends.

Commodities especially exhibit persistent trends. A drought that shrinks the wheat harvest takes years to show up in fields; supply adjusts slowly. Meanwhile, prices rise steadily as the market anticipates the shortage. Once supply does adjust — new crops are planted, new fields are cultivated — the trend reverses. But that reversal also takes time. A managed-futures fund that caught the uptrend often catches at least part of the subsequent downtrend in the opposite direction.

The flip side: whipsaw and reversal risk

Trends do not always last. A price can rise sharply, then reverse just as sharply, leaving a trend follower holding the bag. This is called a whipsaw. A fund might go long because a trend appears to be forming, only to have the price collapse the next day, forcing the fund to exit at a loss. With dozens of markets being monitored simultaneously, whipsaws happen regularly. The question is whether the profitable trends outweigh the losing whipsaws.

The evidence suggests they do, at least over sufficiently long periods. Managed-futures funds have shown positive returns and low correlation to stocks and bonds over many decades. But there are pockets of time — sometimes years — when managed futures underperform. These periods typically occur when trends are short-lived and whipsaws dominate, or when most global markets are moving together without meaningful relative trends to exploit.

The financial crisis of 2008 was a test case. Many managed-futures funds lost money in late 2008 because commodity, equity, and currency trends all reversed sharply in the same direction and at the same time. When trend-following crosses trigger suddenly — when correlations break down and all markets move together — the strategy can suffer outsized losses. The fund’s risk management attempts to limit this, but it is not foolproof.

What does the portfolio look like?

HFMF holds positions in dozens of futures contracts spanning commodities (crude oil, natural gas, gold, wheat, soybeans), currencies (euro, yen, pound, others), fixed income (Treasury futures at various maturities), and equity indices (S&P 500, Nasdaq, international indices). At any given time, the portfolio typically includes a mix of long and short positions across these markets. The fund might be long crude oil and copper, short agricultural futures, neutral to short bonds, and long equity indices.

The weights shift as trends emerge and reverse. A sharp rise in crude-oil prices might cause the fund’s long position in oil to grow (as the position becomes more profitable, its weight in the portfolio grows). Eventually, when the trend reverses and the fund exits the position, the weight shrinks back.

Position sizing is constrained to prevent any single market from dominating. Even though crude oil is far more volatile than Treasury bonds, the fund is sized so that a 5 percent move in oil and a 5 percent move in Treasuries contribute roughly the same amount to portfolio risk. This keeps the fund from becoming inadvertently concentrated in the most volatile futures markets.

Volatility, drawdown, and correlation

Managed-futures funds typically have moderate volatility — higher than Treasury bonds, lower than pure equities. Historical volatility has often been in the 10–15 percent range, though this varies by strategy and market conditions. The key appeal is that the returns are relatively uncorrelated with traditional equities and bonds. When stocks and bonds are both falling (as happened in 2022), managed-futures funds often hold up better because they are short both. When stocks and bonds are both rising, managed futures may lag because the fund is not fully invested in the up-trend.

Drawdowns vary but have historically been shallow relative to equities. A large equity market crash that takes 35–40 percent off stock indices might take 5–10 percent off a managed-futures fund, or might produce a small gain if the trend-following signals correctly identify the reversal.

Who owns HFMF and why

Managed-futures funds are held by institutional investors (pension funds, endowments) who value the non-correlated return stream and the potential to reduce portfolio volatility. They are also held by sophisticated individuals who recognize that trends exist across global markets and want to harvest them without having to time markets or pick individual securities.

Managed futures are less suitable for investors with short time horizons, because drawdown periods can last years. They are also less suitable for those who prefer simplicity — the strategy is black-box-like (a computer running a trend-detection algorithm) and is harder to understand than “buy good companies” or “hold bonds for income”. And they may underperform in long stretches of trendless, choppy markets where volatility is high and directional moves are weak.

How to evaluate HFMF

Examine the prospectus and strategy description to understand the time horizons being used (hours, days, weeks, months, years?) and the universe of futures being tracked. Review the historical performance across different market regimes: a normal bull market, a flat/choppy market, a bear market, a period of rising interest rates. Did the fund protect capital during drawdowns? Did it participate in rallies? Also check the expense ratio and compare it to other managed-futures offerings.

Study the rolling returns (returns over rolling one-year, three-year, and five-year windows) to understand the range of outcomes. If the fund’s returns are wildly variable — sometimes +20 percent, sometimes -15 percent — it will test your patience, even if the long-term average is positive. And remember that past trend-following performance reflects past market structure; if market structure changes — if correlations shift, if volatility regimes change, if central banks engineer smoother, less-trended markets — historical returns may not recur.