The Future of Managed Futures

Terry Flanagan

Success breeds success, particularly in the fast-growing niche of liquid alternatives. 361 Capital, a Denver-based alternatives mutual fund investment firm, launched a managed futures mutual fund two years ago that now has $540 million in assets, and is planning to launch more products this year to capitalize on investor appetite for non-correlated returns.

“For us as a firm, the priority is to successfully launch additional product beyond our current managed futures strategy fund, and to deepen our relationships with our clients,” said Tom Florence, CEO of 361 Capital. “We will be making an announcement about a new fund that we’ll be launching in the first quarter. We would like to have multiple fund launches this year.”

Florence, a seasoned pro with 28 years of mutual fund development, joined 361 Capital about four years ago, when the firm was developing the blueprint for its managed futures fund.

Since its inception in 2001, 361 Capital had been managing alternative investment portfolios for major institutions, financial intermediaries, and wealthy individuals. This experience provided it with an understanding of the strategies that make up alternative investing, including managed futures, long/short equity, multi-strategy, and market neutral.

“We made a distinct change to move into the world of alternative mutual funds,” he said. “We have been an alternatives business since our founding in 2001, but made a very strategic move four years ago. Clearly, there is an opportunity and a need for alternative strategies in mutual fund form. The expansion into the adviser market for alternatives was a key part of the plan.”

Alternative mutual funds continue to expand rapidly. According to Morningstar, 64 new alternative mutual funds were launched in 2013, down slightly from 70 in 2012.

“You’ve got hedge funds and traditional mutual funds coming into the alternatives space,” Florence said. “Big private equity funds like Carlyle, KKR and Blackstone are coming into the liquid mutual fund space. Huge growth is projected for assets flowing into liquid alternative mutual funds in the next ten years. Cash is not much of an option. In fixed income, there’s a great fear of rising interest rates. And you can’t just put 100% of your money into equities, so they’re looking for other investment options, and that’s where alternatives come in.”

A counter-trend model, like the 361 Managed Futures Strategy Fund, offers the opportunity to tactically capitalize on the volatility created from market noise.

The Fund seeks to deliver an actively managed futures strategy in a mutual fund vehicle. “We believe advisers are seeking innovative strategies that have the potential to enhance portfolio returns and not the traditional long-only approaches of the past,” Florence said.

“Our success in selling that fund has been exclusively through financial advisers, primarily RIAs and some broker dealers like UBS,” he continued. “We’re offering mutual funds wrapped around alternative investment strategies that are sold through investment advisers.”

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