Most investors are familiar with stocks and bonds. Fewer are familiar with managed futures, and yet, some of the world's largest institutional investors, including major pension funds, have been allocating to managed futures strategies for decades. Today, managed futures ETFs make this institutional-grade strategy accessible to a much broader range of investors. The KraneShares Mount Lucas Managed Futures Index Strategy ETF (Ticker: KMLM) is one such vehicle, offering systematic exposure to global macro trends across commodities, currencies, and fixed income futures.

What Is a Managed Futures ETF?

A managed futures ETF is an exchange-traded fund that provides exposure to a portfolio of futures contracts, standardized agreements to buy or sell an asset at a future date and price, across a range of global markets. Unlike traditional ETFs that largely hold stocks or bonds, a managed futures ETF gains exposure to price trends in commodities (such as oil, gold, and agricultural products), global currencies, and fixed-income instruments, such as government bond futures.

The "managed" component refers to the systematic, rules-based methodology used to decide which futures to hold, and critically, whether to hold them long (benefiting from rising prices) or short (benefiting from falling prices). This two-directional flexibility is one of the most important features of managed futures strategies, and something that traditional stock or bond ETFs often cannot offer.

Price trends or volatility refer to fluctuations in market prices that may create both gains and losses. While some managed futures strategies seek to respond to sustained price movements, periods of heightened volatility may also result in increased losses, particularly when price movements are short‑lived or inconsistent.

How Does a Managed Futures ETF Work?

Managed futures strategies are typically built on trend-following, a systematic approach that identifies and follows price momentum across markets. When prices are trending upward, the strategy goes long. When prices are trending downward, it goes short. The logic is straightforward: trends persist because of real economic forces, and markets are slow to adjust.

Futures markets exist primarily so that commercial businesses, farmers, energy companies, and airlines can transfer price risk to investors willing to hold it. Managed futures strategies systematically accept this price risk and may earn a premium for doing so. This dynamic creates a return stream that is fundamentally different from equities or bonds, because it is driven by price volatility and macro trends rather than corporate earnings or credit risk.

Macro trends, sustained price movements driven by broad economic shifts, policy changes, or geopolitical developments, are what managed futures strategies are designed to capture. These trends have historically emerged across commodity markets, currencies, and global interest rates, creating opportunities for systematic trend-following strategies to generate returns that are largely independent of whether stocks or bonds are rising or falling.

Key features of how a managed futures ETF works:

• Long and short exposure: Can profit in both rising and falling markets
• Diversified across asset classes: Commodities, currencies, and global fixed income*
• Rules-based and systematic: Removes emotional decision-making from the investment process
• Exchange-traded: Daily liquidity, transparent holdings, accessible through a standard brokerage account

Why Add a Managed Futures ETF to a Portfolio?

The traditional 60/40 portfolio, 60% stocks and 40% bonds, has long been considered a balanced approach. However, this framework has shown limitations during certain periods when stocks and bonds declined together, as they did in 2022, when inflation-related shocks contributed to both asset classes selling off simultaneously.¹

This is where some investors may consider managed futures ETFs as part of a broader portfolio discussion. Because managed futures derive their returns from price trends and macro volatility, they have historically exhibited low or even negative correlation with stocks and bonds during certain market stress environments.² However, correlations can vary materially over time and may not be consistent across all market conditions.

The potential portfolio benefits of a managed futures ETF include:

• Diversification: Low historical correlation to stocks and bonds*²
• Crisis alpha: Historically strong performance during equity drawdowns and macro dislocations²
• Inflation sensitivity: Commodity and currency exposure can provide a natural hedge during inflationary environments
• Positive skew: A return profile in which gains and losses may be unevenly distributed over time, with outcomes that can differ between quiet markets and periods of market stress

Some of the world's largest institutional investors have been rethinking traditional asset allocation frameworks in favor of a more holistic approach. The Total Portfolio Approach (TPA), embraced by pension giants like the California Public Employees' Retirement System (CalPERS) and the California State Teachers' Retirement System (CalSTRS), focuses on managing risk and return at the total portfolio level, creating a natural home for diversifying strategies like managed futures. Managed futures are not designed to outperform stocks in every environment. They are designed to complement stocks and bonds by performing differently across economic regimes.

What Is KMLM?

The KraneShares Mount Lucas Managed Futures Index Strategy ETF (Ticker: KMLM) is a managed futures ETF that seeks to track the KFA MLM Index, a diversified trend-following portfolio of commodity, currency, and global fixed income futures contracts traded on U.S. and international exchanges.

KMLM provides exposure to three broad asset categories:

• Commodities: Including energy, metals, and agricultural markets
• Currencies: Major global foreign exchange pairs
• Fixed Income: Government bond futures across major developed markets

The strategy is systematic and rules-based, meaning position sizes and directional exposures are determined by the index methodology rather than discretionary forecasts, with exposures adjusted based on predefined trend‑following rules. This removes behavioral bias and ensures consistent application of the trend-following approach across all market environments.

Why KMLM Among Managed Futures ETFs?

Not all managed futures ETFs are constructed the same way. KMLM is differentiated by several characteristics that make it a compelling choice for investors seeking managed futures exposure:

• Deep index history: The KFA MLM Index methodology has a track record dating back to January 1988, providing a long, rigorous historical dataset across multiple market regimes, including the Global Financial Crisis, the COVID crash, and the 2022 inflation shock.
• Diversification across asset classes*: By spanning commodities, currencies, and fixed income futures across global markets, KMLM seeks exposure to price movements across multiple asset classes, rather than concentrating in a single asset class.
• Positive skew: Unlike stocks and bonds, which historically have exhibited negative skew, managed futures strategies like KMLM have a return distribution characterized by uneven outcomes over time, which may differ across market environments, including quieter markets and periods of market stress.
• ETF structure: KMLM delivers managed futures exposure through an exchange-traded fund, meaning daily liquidity, transparent holdings, and accessibility through a standard brokerage account, without the complexity of direct futures trading or the fee structures of traditional hedge funds.
• No equity exposure: Many managed futures ETFs incorporate equity futures or equity-linked components in their portfolios. KMLM does not. This is an intentional design choice. Equities are typically the dominant risk factor in most investor portfolios, and adding equity exposure inside a managed futures allocation can increase correlation to stocks during periods of market stress, precisely when diversification is needed most*. By limiting exposure to only commodities, currencies, and fixed-income futures, KMLM seeks to provide exposure to asset classes that differ from a strategy that behaves like the rest of the portfolio when conditions deteriorate.

How to Think About Managed Futures Performance

One of the common mistakes investors make is evaluating a managed futures ETF the same way they evaluate stocks. Because managed futures strategies are designed to perform differently from equities, not to beat them in all environments, comparing them on a simple side-by-side return table may not provide the full picture.

The right question is not "did KMLM beat the S&P 500 this year?" The right question is "did KMLM fulfill its role in the total portfolio?" A managed futures allocation is more analogous to insurance than to a growth investment, as they are typically discussed in terms of their potential portfolio role rather than return maximization.

Investors who maintain a disciplined allocation to managed futures during quiet periods can be positioned to benefit when macro volatility returns. Trimming the allocation during stretches of underperformance risks removing exactly what the strategy is designed to provide.

Conclusion

A managed futures ETF like KMLM offers investors something genuinely different from the stocks and bonds that make up most portfolios: systematic exposure to global macro trends, the ability to go both long and short, and a historical track record of performing well in environments that challenge traditional allocations most.

As geopolitical uncertainty, shifting central bank policy, and macro volatility continue to shape the investment landscape, the case for including a managed futures ETF as a diversifying allocation in a broader portfolio remains compelling.* KMLM provides a transparent, liquid, and institutionally grounded way to access this strategy.

---

References to institutional investors are provided solely for market context and educational purposes and do not imply endorsement, validation, or suitability of any investment strategy for retail investors.

*Diversification does not ensure a profit or guarantee against a loss. KMLM is non-diversified. The statement regarding diversification refers to sector exposure, not regulatory diversification under the Investment Company Act of 1940.

For KMLM standard performance, top 10 holdings, risks, and other fund information, please click here.

Citation:

1. Data from Bloomberg as of 3/13/26.
2. Data from Bloomberg and Mount Lucas as of 12/31/2022, retrieved on 12/31/2025.

Definitions:

1. KFA MLM Index ("KMLM's Index"): The KFA MLM Index is a diversified trend-following portfolio of commodity, currency, and global fixed income futures contracts traded on U.S. and foreign exchanges. The performance data for the index is a representation of the MLM Index from 1/1/1988 to 12/31/2004, the MLM Index EV ("EV"), with enhanced Execution and Volatility characteristics, from 1/1/2005 to 11/30/2020, and, using the same methodology as the "EV," the KFA MLM Index from 12/1/2020 on.
2. S&P 500 Index: A market capitalization-weighted index tracking the performance of 500 leading publicly traded companies in the United States, broadly representing the large-cap equity market. Inception date: March 4, 1957.
3. Bloomberg US Aggregate Bond Index ("The Agg"): A broad-based, market capitalization-weighted bond market index representing intermediate-term investment-grade bonds traded in the United States. Inception date: January 1, 1976.