This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Managed Funds for Turbulent Markets

NEW YORK ( TheStreet) -- Managed futures offer investors exposure to commodities, but with a strategy designed to make money in up or down markets. Instead of only going long a commodity, these funds can take short positions as well, based on the rules guiding the underlying index. Over the long-term, this strategy can pay off.

An ETN that tracks a long/short commodity index: ELEMENTS S&P CTI ETN (LSC), or ELEMENTS Linked to the S&P Commodity Trends Indicator - Total Return. With an average of 80,000 shares trading per day, volume is adequate, but investors must weigh the credit risk of the issuer, HSBC USA. LSC has an expense ratio of 0.75%.

Since inception in June 2008, LSC is down about 17%, but PowerShares DB Commodity (DBC) is down more than 50% and iShares S&P GSCI Commodity-Indexed Trust (GSG) is down more than 60%.

The index tracked by LSC uses a moving exponential average to decide whether to go long or short in each sector. When the price is above the average, the index will go long the commodity, and when it is below, the index will go short. In the case of energy, the index will not go short due to potential upside volatility. Instead, energy's 37.5% weight in the index is spread "proportionately to the other five sectors" as the fund takes a neutral position.

The sectors are rebalanced monthly and the components within the sectors are rebalanced annually. As of the May 2010 rebalancing, LSC is long everything in its index except grains, industrial metals, coffee and sugar. Current weightings are 37.5% energy, 23% grains, 10% industrial metals 10.5% precious metals, 10% livestock, 3% in coffee, and 2% each in cocoa, cotton and sugar.

From February 2009 until May 2010, LSC lost about 20% while DBC and GSG gained about 20%. Since the system uses moving averages, it will tend to lag at crossover points, but do well as long-term trends unfold. Most of LSC's underperformance came in March, April and May of 2009 as commodities snapped back and rallied. It underperformed again in October 2009 as some commodities rallied strongly.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DBC $17.18 0.00%
GSG $19.69 0.00%
LSC $6.03 0.00%
AAPL $123.25 0.00%
FB $83.30 0.00%


DOW 17,712.66 +34.43 0.19%
S&P 500 2,061.02 +4.87 0.24%
NASDAQ 4,891.2190 +27.8570 0.57%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs