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Mike:

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Hi everyone, I’m Mike Pacitto with iM Global Partner, joined by Co-Founder of DBi and Co-Portfolio Manager, Andrew Beer. Thanks for joining our monthly update on the iM Global Partner DBi Managed Futures Strategy ETF– ticker: DBMF.

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Compared to a whipsawing raucous April, May was calm – whether clear skies or eye of the hurricane is to be determined, and we’ll get into more of that shortly with Andrew.

But first let me explain the visual that you’re looking at here. It’s a play off of the classic asset class performance quilt that has been in the industry forever. That quilt typically makes the case for why you should be diversified amongst various asset classes, and how unpredictable asset class performance is from year to year.

Now for our modified version, we’re showing the managed futures constituents that make up the Soc Gen CTA Index – and the point here is that it’s incredibly difficult to pick a manager that consistently outperforms the asset class itself. In fact, there’s a big risk of underperforming – by a lot.

Now we know that managed futures is a powerful, alpha-generating alternative for portfolios – but if it’s this difficult to get the benefit of managed futures with consistency, why not simply replicate the best attributes of the asset class, seeking to mitigate single manager selection risk and minimize fees – thus delivering the low correlation and alpha that clients are looking for. That’s the DBMF story.

So with that set-up, this month’s update is called “Complexity Crisis in CTA Land,” and I hand it over to you Andrew.

Andrew:

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Thank you, Mike.

The markets – equity markets at least – have liberated themselves from Liberation Day.  By this, I mean that markets have concluded – for now — that it should discount bluster and threats and focus on fundamentals – a Teflon economy, AI, etc.  In other words, hunt for the signal amidst deafening noise.  The key words are “for now.”  And this is because, as noted in the second bullet point, the macro landscape is as clear as mud:  will tariffs be recessionary, inflationary or … both?  Was the much-talked-about demise of the American Exceptionalism trade another headfake?  Will the Big Beautiful Big give us a Big Beautiful Bond Market Tantrum?  What new geopolitical headache will pop up in coming months?  So enjoy the relative calm, but make sure to keep your market disaster prep kit fully charged.

Which brings us to managed futures and the left side of the page.  DBMF ended May flattish and is down 2.86% this year.  The SocGen CTA Index (hereinafter the “Hedge Fund Index”) was down 1.8% last month and is down 8.4% this year.  That’s roughly 500 bps of underperformance this year relative to replication, after 500 bps of underperformance last year.  Which brings us to the third bullet point on the right:  The Complexity Crisis in CTA Land.  In recent years, there’s been an arm’s race among CTAs to add more and more markets and more statistical bells and whistles like vol controls to add “diversification” quote-unquote.  If they don’t improve performance relative to replication – effectively the strategy beta – then we ask, why bother?  Why pay higher fees?  Why tolerate 100 or 200 bps higher trading costs, which may not show up in the reported TER but presumably is a drag on long term returns?  Keep this in mind as we flip through the next slides.

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This slide shows year to date performance of DBMF versus the SGCTA, Morningstar category of 40 Act funds and Bloomberg US Agg.  The four takeaways are that bonds are doing their job for the first time in years, CTAs overall have been whipsawed badly, replication underperformed a bit when the Euro spiked but has weathered the market chaos in much better shape, and the Morningstar category is outperforming the SGCTA index by a decent margin.  On this last point, I will be speaking at the Morningstar Investor Conference later this month on “Can Hedge Funds Work Outside of Hedge Funds?” – with luminaries from Blackstone and AQR no less – so if you plan to attend the conference, please reach out and let’s hang.

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Now turning to our inception to date, DBMF has outperformed the hedge fund index by nearly 300 bps per annum and tripled the returns of the Morningstar Category over roughly six years.  Our drumbeat is that replication is a systematic, repeatable investment process with structural alpha – with alpha based on efficiency and lower fees.  But to take it a step further, as we will discuss in more depth on upcoming zoominars and webinars:  in this space we believe, “strategy beta is better.”  The practical implication for any RIA or model builder listening to this:  when building capital markets assumptions, when evaluating single manager alpha, when benchmarking performance – use the index SocGen built around our replication engine.  We think that’s a cleaner representation of “strategy beta” than other options.  Hit Mike and he can direct you to how to get the data from Morningstar.

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Here’s our slide on volatility-adjusted positioning.  The overall portfolio narrative is mixed – somewhat predictable given recent market moves.  We remain long gold and crude oil – likely helpful if inflation returns or the dollar crashes.  We are modestly long the yen against the Euro – perhaps an idiosyncratic bet on Japan hiking rates while Europe cuts.  We’re somewhat long the front and middle of the Treasury curve, which say “recession” more than “inflation” or “bond market tantrum.”  And lastly, we are still slightly long non-US equities and short US equities, a remnant of the trade around the end of American Exceptionalism in equity markets.

And now for year to date contribution. 10

The story this year is relatively simple:  long gold was the big winner, while short the Euro was the big loser.  Interestingly, these both can be thought of as bets, in part, on the US dollar.  But with some nuance.  Gold is a bet that inflation can erode the value of fiat currencies, which is a real and growing concern given the largely inflationary policies coming out of Washington.  The short Euro position was based on the market view that US economic growth would outstrip Europe’s – so a relative value play within fiat currencies.  The tail risk event was that geopolitical threats led both to fears that foreign holders would sell US dollar assets and that Europe would rearm and shake off its economic malaise.  The latter cost us more than the former helped.  In any event, extending across the other asset classes, whipsaws in Treasuries and rates cost some performance, while equity exposure has helped a bit.

And, with that, I’ll pass the baton back to Mike.

Mike:

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Thanks Andrew –

Let’s wrap up with long-term performance numbers for DBMF – which by the way, has now passed its 6-year track record in May – annualized return since inception including the month that was May 2025 is now 6.30%, ahead of the Soc Gen CTA index by 290 basis points annualized, and ahead of the Morningstar Systematic Trend Average by 420 basis points.

And long-term outperformance against the traditional diversifier for equities – that being bonds as represented by the Bloomberg AGG – remains well intact – DBMF outperforming by 532 basis points annualized.

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Thanks as always to our clients and to our prospective clients for your confidence and interest in DBMF

If you have more questions about the strategy, would like further information or a call with us please don’t hesitate to reach out – just send us an email at: [email protected]

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