Rydex Brings Managed Futures to Masses

Rydex launched a mutual fund earlier this month that offers small investors a crack at an investment strategy normally reserved for the wealthy: managed futures.

Managed futures, also known as commodity futures, are derivative contracts tied to physical commodities, including grains and livestock, or financial instruments, such as currencies or interest rates. They can produce returns that aren't closely correlated to the performance of stocks and bonds.

The timing of the launch has been less than ideal. It comes as some of the big players that follow trends in commodity futures have been hit by the recent market rout. The managed futures funds tracked by Hedgefund.net lost an average 1.13% in February and were down 0.39% in the first two months of the year. It was the only hedge-fund strategy tracked by the firm to post losses during the month or year to date.

Ed Egilinsky, Rydex's managing director of alternative investments, says the (RYMFX Quote)Managed Futures Fund's (RYMFX) benchmark index, the Standard & Poor's Diversified Trends Indicator, held up better than a lot of managed futures funds in February, giving up just 0.05%. Moreover, "low correlation doesn't necessarily mean alterative investments will be up every time other markets are down; you have to look at it from a long-term perspective."

He says Rydex's fund gives individual investors access to strategies "institutions have been using for decades" to manage risk and diversify their portfolios.