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EVOAX | EVOCX | EVOIX | EVONX

ALTEGRIS FUTURES EVOLUTION STRATEGY FUND.

Altegris Futures Evolution Strategy Fund celebrates its 5-year anniversary this month as one of the few mutual funds in the managed futures category to earn Morningstar's coveted five-star rating.*

It is a one-decision mutual fund option for integrating managed futures into your clients' portfolios. Altegris searches for and provides access to "best of breed" managed futures managers that have demonstrated success capturing trends in managed futures over time.** The internal diversification of the Fund, produced by its different managers and styles, including active fixed-income management, may potentially smooth returns and temper share price volatility.


Reallocating the equity portion of a portfolio into managed futures may help to retain growth potential, while also cushioning periods of equity market stress. The table below shows how managed futures have performed, relative to the S&P 500 TR Index, in quarters when the stock market has experienced the worst returns. The bottom line: Managed futures outperformed the index during these periods by an average of 21.2%.

RETURNS DURING THE S&P 500 TR INDEX WORST QUARTERS SINCE 2000
Ranked by worst quarterly total return | As of September 30, 2016
  US Stocks Managed Futures Difference
Lehman bankruptcy Q4 2008 -22.0% 12.7% 34.7%
Worldcomm scandal Q3 2002 -17.3% 18.0% 35.3%
Terrorist attacks on WTC and Pentagon Q3 2001 -14.7% 3.9% 18.6%
Greek downgrade & European sovereign debt crisis Q3 2011 -13.9% 2.4% 16.3%
Tech Bubble: Middle to late innings Q2 2002 -13.4% 15.8% 29.2%
Early stages of recession Q1 2001 -11.9% 10.6% 22.5%
"Flash crash" Q2 2010 -11.4% -3.1% 8.3%
S&P 500 reaches bottom in financial crisis Q1 2009 -11.0% -2.8% 8.2%
Credit crisis: Collapse of Bear Stearns Q1 2008 -9.5% 8.5% 18.0%
Credit crisis: Bailout of banks Q3 2008 -8.4% -6.9% 1.5%
Initial stages of Dot Com bubble burst Q4 2000 -7.8% 33.0% 40.8%
Average -12.8% 8.4% 21.2%

Source: Bloomberg and Altegris

Past performance is not indicative of future results. All asset classes are subject to various risks that affect their performance in different market cycles, and different economic periods will produce different results. The reader should not assume that any asset class referenced was or will be profitable over any time period not shown.

There is no guarantee that any investment will achieve its objectives, generate profits or avoid losses. Equity investing involves market risk or the risk that stocks will decline in response to adverse company news, industry developments or a general economic decline. Managed futures investments may be highly leveraged, speculative and volatile, and may also be subject to higher fees and expenses. There are substantial risks and conflicts of interests associated with managed futures and commodities and only risk capital should be invested.

Date range based on common period of data availability. Performance is represented by index returns and does not represent any particular Fund or investment. An index is unmanaged and not available for direct investment.

Indices: US Stocks: S&P 500 Total Return Index; Managed Futures: SG Trend Index.

Low or Negative Correlation

Investors have become painfully aware of stock market volatility through several shocks over the past two decades.

Altegris believes investors need to think beyond a traditional “60/40” portfolio and look for a better alternative.

Managed futures have demonstrated the capacity to diversify equity risk. A strategic allocation to managed futures, in fact, has shown the potential for risk diversification, via low or negative correlation, going back 5, 10 and 15 years.

CORRELATION TO MANAGED FUTURES
JANUARY 2000 – SEPTEMBER 2016

Source: Barclays, Bloomberg

Past performance is not indicative of future results. There is no guarantee that any investment will achieve its objective, generate profits or avoid losses.

These benchmark indices are used for general market comparisons and are not meant to represent any particular investment. There is no guarantee these correlations will persist. An index is unmanaged and not available for direct investment.

Indices: Managed Futures: SG Trend Index; US Stocks: S&P 500 Total Return Index; Int’l Stocks: MSCI EAFE Index; REITs: FTSE NAREIT Composite Total Return Index; Commodities: GSCI Total Return Index; US Bonds: Barclays US Aggregate Bond Index. The correlations are based on index returns.

As a strategic core holding, managed futures may provide overall portfolio risk diversification.

With its income enhancement features and its low or negative correlation to stocks, it’s fair to ask where an allocation to managed futures might come from. The answer, logically, is from both the equity and fixed income portions of an investor’s portfolio.

Adding a modest 10 percent allocation to a traditional “60/40” portfolio would require proportional reductions in the equity and fixed income sides. That means reducing the equity side to 54 percent (a reduction equal to .60 x .10) and a diminution to 36 percent (lessened by .40 x .10) on the fixed income side.

A more definitive 20 percent commitment to managed futures would transform a “60/40” portfolio into a “48/32/20” mix.

Altegris believes that carving out and maintaining a 20 percent allocation to managed futures, represented by the SG Trend Index, would have likely enhanced a classic/traditional portfolio, potentially boosting returns and dampening volatility over the past two decades.

MANAGED FUTURES IN A TRADITIONAL PORTFOLIO
JANUARY 2000 – SEPTEMBER 2016
 

Traditional Portfolio

(60/40)

Managed Futures

Enhanced Portfolio

(48/32/20)

Annualized Return 5.31% 5.68%
Annualized Standard Deviation 8.64% 7.17%
Sharpe Ratio 0.33 0.44

Source: Barclays, Bloomberg

PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. The total return of an investment is only one measure of performance. Performance should never be the sole consideration when making an investment decision. There is no guarantee that any investment product will achieve its objectives, generate profits or avoid losses. The referenced indices are shown for general market comparisons and are not meant to represent any particular Fund. An investor cannot invest directly in an index. Moreover, indices do not reflect commissions or fees that may be charged to an investment product based on the index, which may materially affect the performance data presented. Stocks represented by the S&P 500 Total Return Index; Managed Futures represented by the SG Trend Index, Bonds represented by the Barclay’s US Aggregate Bond Index.

TIME PERIOD: JANUARY 2000–SEPTEMBER 2016; date range based on common period of data availability. This is a hypothetical illustration. Past performance is not indicative of future results. There is no guarantee that any investment will achieve its objectives, generate profits or avoid losses. The above is not intended, and should not be construed as asset allocation advice. Managed Futures may not be suitable for everyone. These allocations are based on Altegris’ views about what historically constitutes a traditional portfolio and how it can be further diversified by adding an allocation to managed futures. Returns are represented by benchmark indices for general market comparisons and are not meant to represent any particular investment. An investor cannot invest directly in an index. Moreover, indices do not reflect commissions or fees that may be charged to an investment product based on the index, which may materially affect the performance data presented.

The Altegris Futures Evolution Strategy Fund (EVOAX, EVOCX, EVOIX and EVONX) provides a distinctive approach to managed futures that can be used as either a core portfolio stake or as a complement to an existing managed futures allocation.

Altegris searches for and provides access to “best of breed” managed futures managers that have demonstrated success capturing trends in commodity and financial futures, effectiveness in risk management and in building operational infrastructure. Altegris adds further value by allocating to an actively managed fixed income portfolio, an evolution on traditional futures investment where returns on cash deposits were previously limited.

Mutual funds involve risk including possible loss of principal.

Current Managed Futures Strategy Exposure:

  • Winton Capital Management pursues a longer-term trend-following tack, mostly in financial futures, with a stringent focus on risk management and volatility control.
  • ISAM uses a broadly diversified portfolio of commodity futures to provide return diversification to Winton.

Current Fixed Income Strategy:

  • DoubleLine Capital Management actively manages the fixed income side, investing the fund’s cash collateral in a diverse mix of strategies aimed at controlling duration risk.
BEST OF BREED TREND MANAGERS AND ACTIVE FIXED INCOME
AS OF SEPTEMBER 30, 2016

Winton Capital Management

  • Longer-term trend following approach
  • Very strong risk-reward profile among peers
  • Stringent focus on risk management

ISAM

  • Medium-term "pure" trend following approach
  • Trading strategies developed by principals over 30 years
  • Broadly diversified portfolio of commodity futures

DoubleLine Capital Management

  • Active fixed-income management
  • Multi-strategy approach
  • Seeks to maximize returns and control risk

1 Target strategy exposure as of September 30, 2016. Total exposure of the strategy will range from 170% to no more than 200%.

2 The managed futures investments selected by Altegris Advisors to gain exposure to the managed futures managers listed above are subject to change at any time, and any such change may alter the strategy’s access and percentage exposures to each such manager. Although the strategy currently pursues its managed futures strategy by investing up to 25% of its total assets in a wholly-owned subsidiary, the strategy may also make managed futures investments directly, outside of such subsidiary. Typical managed futures strategy exposure will be 100% up to a maximum of 125% using notional funding. Notional funding is the term used for funding an account below its nominal value. It is a form of leverage that does not involve borrowing. Leverage can increase the volatility of an investment.

3 Typically, 60%-80% of the strategy’s total net assets will be invested in fi xed income strategies.


MORNINGSTAR RATING

Class I shares overall rating out of 105 managed futures funds as of 2/28/2017.


Morningstar Ratings measure risk-adjusted returns. The Overall Morningstar Rating™ for a fund is derived from a weighted average of the performance figures associated with its 3-, 5-, and 10-year (if applicable) rating metrics. Past performance is no guarantee of future results. For the most recent month-end performance, please visit www.altegris.com/evoax.

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More information including the performance current to the most recent month-end can be found on the Fund homepage.

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ACTIONABLE STRATEGIES AND MARKET OUTLOOK FROM ALTEGRIS, A TRUSTED LEADER IN ALTERNATIVE INVESTMENTS.

For many investors and advisors, Altegris is synonomous with alternative investments and integrity. It’s in our very name. We’re focused solely on alternative investments and search the world to find the best investment talent in managed futures, global macro, event-driven, long/short equity and other strategies. Our suite of investment solutions are designed to improve portfolio diversification and seek to minimize investor risk while maximizing potential returns.

For more information, call 888.524.9441.