It is hard to find anyone who objects to the idea of offering the portfolio diversification benefits of managed futures to retail investors through a broad mutual fund structure, but if the two main regulators don’t come to some accommodation, the brakes may be placed on the emergence of the managed futures mutual fund.
These products have been popping up in recent years based on a 2003 rule change that allowed for the creation of Registered Investment Company (RIC) products that are similar to public commodity pools but are exempt from registering as CPOs.
Altegris Investments, which has offered commodity pools for many years, launched its first RIC fund in September and it already is managing $350 million.
Altegris President and CEO Jon Sundt says these products are easier to distribute than commodity pools. "Because they are mutual funds, they are available to a broader spectrum of investors and they are much easier to implement. It is much easier to buy a mutual fund than the old commodity pools," Sundt says.
In a comment letter to the Commodity Futures Trading Commission (CFTC) last fall, the National Futures Association (NFA) noted that they were not interested in eliminating the popular managed futures mutual fund product, but that they wanted to ensure that "RICs offering exposure to actively managed futures strategies to retail investors for as little as $1,000 be within the regulatory purview of both the CFTC and NFA."
"Legally they are not commodity pools, structurally they are commodity pools," says NFA General Counsel and Secretary Tom Sexton.