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AMFQX Had an Overall Market Beta of Zero at the End of 4Q15

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Absolute returns

The 361 Managed Futures Strategy Fund – Investor Class (AMFQX) seeks to generate an absolute return that has minimal correlation to the broader equity and bond markets’ return. At the end of 4Q15, the fund had an overall market beta of zero compared to the beta of 0.04 of its benchmark Morningstar Managed Futures Category Average. Beta measures the fund’s sensitivity to equity market movements. Some of the fund’s top holdings include floating-rate notes of JPMorgan Chase (JPM), Kansas City Southern (KSU), Turquoise Hill Resources (TRQ), and Goldman Sachs (GS) among others.

The graph above gives a comparative analysis of a mixed portfolio of the AMFQX fund and the S&P 500 Index (VFINX) with the S&P 500 Index itself.

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Portfolio diversifier

Note that the graph above gives the performance of a mock portfolio of 30% of the AMFQX fund and the remaining 70% of the S&P 500 Index for 2015. The addition of AMFQX in a portfolio comprising solely of S&P 500 Index has resulted in the reduction of the total return of the index. But achieving high return isn’t always the primary goal for an investor. A hedge fund strategy that’s used tactically can help in reducing the overall risk of one’s portfolio having direct equity investments.

Conclusion

Alternative funds are a modified version of traditional mutual funds that make use of leading hedge funds strategies to achieve their investment objectives. The 361 Managed Futures Strategy Fund – Investor Class (AMFQX) follows a counter-trend model to employ its “Managed Futures” strategy. To read more about alternative funds that use “Managed futures” read our series on AQR Managed Futures Strategy Fund STR I (AQMIX).

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