Dirty Portfolios – Managed Futures As A Portfolio Element

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One of the most attractive features of Managed Futures is that they can potentially enhance any style of investment portfolio. Like adding an olive to a martini makes it “dirty,” Managed Futures may enrich classic portfolio styles, adding a “twist” to create “dirty portfolios.” These portfolios, enhanced with Managed Futures, can potentially increase returns, reduce drawdowns, decrease volatility, or a combination of all three.

In this paper, Mount Lucas illustrates their point by analyzing the potential benefits of adding Managed Futures to six popular portfolios they sourced from the popular investing site They recreated these portfolios with representative asset classes, then produced “dirty” versions of them to demonstrate the effectiveness of Managed Futures. Here are the portfolios they created “dirty” versions of:

  • Harry Browne Permanent
  • Margaritaville
  • Swensen Lazy
  • Armstrong’s Ideal Index
  • Swedroe Minimize Fat Tails
  • Traditional 60:40

Click here for a list of Term/Index definitions.

Index returns are for illustrative purposes only and do not represent actual Fund performance. Index returns do not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index. Past performance does not guarantee future results.