Taking a step further, we look at ETF and mutual fund performance within the categories to see if any of these strategies offered a more favorable return during the period. Because some of these ETFs are newer and may not trade on a daily basis and/or may have outsized premium/discounts, we are using the return of the ETF net asset value (NAV), or indicative value in cases of ETNs. (Note that we are excluding -80% outlier funds in this analysis so as to not unfairly penalize the other funds in the category—in this case, the options-based mutual funds).
Average Return For Mutual Fund Or ETF Per Category
For the most part, the performance dispersion between mutual funds and ETFs was minimal, with one exception being in the Managed Futures category. Here is the same dispersion chart as above with that category in isolation:
For a larger view, please click on the image above.
Time Span Matters
While there are a limited number of managed futures ETFs, these performed admirably versus their mutual fund counterparts. Looking through the other categories, there was a much more normal dispersion between ETFs and funds.
In no way does this infer that managed futures ETFs are better than their fund counterparts, but it also doesn’t say they are worse. One must remember that this analysis was very short-dated.
Many of these funds/ETFs regardless of category provide value over time rather than in such a short time span. Additionally, this analysis does not include the preceding run-up in equities and, until more recently, lower interest rate environment.
Ultimate Goal: Uncorrelated Returns
Some of these funds may have had stellar performance up to this period, while some may have had strong negative performance, and some may have had flat-lining performance. And that is the appeal of many of these alternative funds: Their return stream is uncorrelated to anything else, and as such, can provide diversification benefits within a larger more traditional portfolio.
Past performance is no guarantee of future results. Investments are subject to risk, and any investment strategy may lose money. The investment strategies presented are not appropriate for every investor, and financial advisors should review the terms, conditions and risks involved. Some information contained herein was prepared by or obtained from sources that Stadion believes to be reliable. There is no assurance any of the target prices or other forward-looking statements mentioned will be attained. Any market prices are only indications of market values and are subject to change. Any references to specific securities or market indexes are for informational purposes only. They are not intended as specific investment advice and should not be relied on for making investment decisions. The S&P 500 Index is the Standard & Poor’s Composite Index of 500 stocks and is a widely recognized, unmanaged index of common stock prices. One cannot invest directly in indexes, which are unmanaged and do not incur fees or charges. Founded in 1993, Stadion Money Management is a privately owned money management firm based near Athens, Georgia. Via its unique approach and suite of nontraditional strategies with a defensive bias, Stadion seeks to help investors—through advisors or retirement plans—protect and grow their “serious money.” Contact Stadion at 800-222-7636 or www.stadionmoney.com. SMM-022018-173