This is a managed futures strategy ETF that trades commodity, currency, and bond futures using a trend-following approach. It tracks the Mount Lucas index, taking long or short positions based on trends across multiple asset classes, and seeks a return source with low correlation to equities.

It suits investors who want to add a diversifying return source through a trend-following strategy with low correlation to stocks and bonds, while being willing to tolerate weak performance in periods without clear trends.

It is a passive (index-tracking) ETF managed by KraneShares.

The fund tracks the Mount Lucas Managed Futures Index and takes long or short positions depending on price trends in commodity, currency, and bond futures. It seeks profits when trends are clear. Because of its low correlation with stocks and bonds, it aims to provide diversification during market declines, but its structure tends to underperform when trends are weak.

• Trend following across multiple asset futures
• Pursuit of low correlation with equities

Assets under management (AUM) stand at $597.3M, and the total expense ratio is 0.90% per year.

The main comparison point is a strategy that follows trends across multiple futures to seek a diversifying return source, as opposed to products that invest in a single asset.

Managed futures strategies depend on the strength of asset price trends. They generate gains when trends are clear and tend to struggle when direction changes frequently. Because of their low correlation with stocks and bonds, they can also play a defensive role during sharp market sell-offs.

Fund flows into managed futures products vary with market volatility, demand for diversification, and trend strength. When interest grows in diversifying return sources beyond stocks and bonds, capital sometimes moves into this group of products. It is also worth noting that performance can differ greatly depending on the trend environment.

Low correlation and crisis protection are its strengths, while underperformance without trends, volatility, and strategy complexity are the considerations.

For another managed futures strategy, direct substitutes include DBMF, and for high-distribution preferred stock income, products such as PFFA are also worth comparing. Those seeking actively managed preferred stock income can also consider products such as PREF. Among the three products shown in the table, DBMF, PFFA, and PREF, the two products PFFA and PREF follow preferred stock income strategies, which differ in nature from trend following, and this ETF is differentiated by its Mount Lucas index-based trend following.

Here are the points to review before investing in KMLM. Low correlation and crisis protection are appealing, but underperformance without trends, volatility, and strategy complexity need to be checked in advance. It is also a good idea to compare it with other managed futures and income products.

Weak performance when trends change frequently and the volatility of futures positions are the main variables for returns, and the trend-following structure makes performance hard to gauge intuitively. If periods of weak trends last long, the fund may underperform for an extended time.

It is a suitable candidate for investors who want to add a diversifying return source through a trend-following strategy with low correlation to stocks and bonds. For another managed futures option, consider products such as DBMF, and for trend following based on the Mount Lucas index, it is advisable to compare this product alongside it before choosing.