I was intrigued by the comment from Eric Crittenden that we shared yesterday about using very volatile managed futures. With that in mind, a truly awful portfolio that no one could endure despite the decent long term result.
MFTNX is managed by Dunn Capital and is one of the most volatile managed futures funds. Please leave a comment if you know of one more volatile. Look at how much time it has spent down 30%!
Portfolio 1 compounded 132 basis points better than VBAIX despite MFTNX' low growth rate. Including client/personal holding Merger Fund (MERFX) in Portfolio 2 made it more palatable by lowering the volatility noticeably but not dramatically without sacrificing too much growth. The drawdown numbers are only slightly better but deconstructing that a little, there was pretty much no help with fast declines but a huge help in 2022 when Portfolio 1 eeked out a small gain and Portfolio 2 was down less than half of VBAIX' decline.
I'm a big believer in small exposure to one or maybe two negatively correlated holdings but this is a good example to show that purely by the numbers, a large holding in one of these can improve risk adjusted results.
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