Excess Returns Podcast Summary

Episode: "Why Most Investors Won't Buy the Best Diversifier | Andrew Beer on Managed Futures"

Date: December 10, 2025 | Guests: Andrew Beer (DBi)
Hosts: Jack Forehand, Justin Carbonneau, Matt Zeigler

Episode Overview

In this episode, the hosts sit down with Andrew Beer, founder of DBi and a leading thinker in the alternative investment space, to demystify managed futures—an often misunderstood but historically reliable portfolio diversifier. The conversation covers the basics of managed futures, the statistical and practical reasons for their effectiveness as diversifiers, why so few investors and advisors embrace them, and the narrative challenges in making these strategies mainstream. Andrew shares his views on the move toward product complexity, the importance of simplicity, and gives actionable advice for both investors and advisors considering or using managed futures in client portfolios.

Key Discussion Points & Insights

1. What Are Managed Futures? (03:38)

• Simple Explanation:
  Andrew likens managed futures to a "functioning crystal ball"—a way for investors to capture trends in global markets that other asset classes tend to miss.

  "It's kind of like a crystal ball. It's that simple. Whatever these guys are doing, the complexity underneath the hood is sometimes they get a clear view of what the world's going to look like in a year or two, and they invest and they make money on it." — Andrew Beer (04:19)

• Core Asset Classes:
  Managed futures strategies typically trend-follow across four main asset classes: equities, rates (bonds), commodities, and currencies. They often monitor hundreds of markets but may focus on the largest, most liquid trends.

• Trend Following in Practice:
  Trends arise from both new information (changes in fundamentals) and shifts in sentiment. Even in "efficient" markets, sometimes someone knows something first, and managed futures attempt to systematically identify and follow those price moves.

2. Why Add Managed Futures to Portfolios? (12:52)

• Powerful Diversification:
  Managed futures have "zero correlation" to stocks or bonds, especially valuable when traditional diversification breaks down (e.g., during crises like 2000-2003 dot-com bust, 2008 GFC, 2022 inflation shocks).

  "If you can bring something into a portfolio from a statistical perspective that has zero correlation to stocks and bonds and tends to do the best when the markets are at their worst... that is very, very powerful from a modeling perspective." — Andrew Beer (13:45)

• Sharpe Ratio Impact:
  Statistically, models suggest even a 20-25% allocation could be justified, although practical and behavioral reasons keep actual allocations much lower.

• Behavioral & Communication Barrier:
  Despite 50 years of evidence, most investors aren't motivated by a modest Sharpe ratio improvement—they want outcomes ("up 20% when everything else is down"), not technical explanations.

  "None of your clients are really going to care because... no one is going to give you a hug after 20 years for raising their Sharpe ratio by 0.05." — Andrew Beer (15:27)

3. The Complexity Challenge & Narrative Gap (16:30)

• Explaining 'Black Boxes':
  The industry’s focus on technical superiority and model sophistication is a barrier. Clients want to understand the "what" and see tangible results, not wade through jargon.

  "When you talk about what it actually does in the real world... that's what people care about... getting away from that complexity and getting to that is the key to this whole thing." — Host (Justin) (17:46)

• Faster Reaction to Macro Shifts:
  Managed futures can dynamically respond to fast-moving macro environments (e.g., the inflation pivot in 2021), a quality that slow-to-react model portfolios lack.

• Mainstreaming Alternatives:
  Fee sensitivity and the recent move toward model portfolios (including a "20% Alts bucket") create opportunities but also raise the importance of simplicity, low cost, and tax efficiency.

  "...If leverage buyouts were still called leverage buyouts, they wouldn't be the asset class that they are. But 'private equity'... sounds a lot safer. Junk bonds became 'high yield.' So I think the narrative component is critically important." — Andrew Beer (22:44)

4. Line Item Risk & Behavioral Issues (23:10)

• Perception vs. Reality:
  Because managed futures are uncorrelated, their returns often can't be "explained" by clients in terms of stocks or bonds. This unpredictability makes it uncomfortable unless properly set up in the context of asset allocation—"the space went down 4%, not my guy went down 4%." (27:43)

5. Simplicity vs. Complexity Wars (37:07)

• The "Rush to Complexity":
  As fees compress in alternatives, some managers try to add value (or justify fees) with more complex models and exotic markets—but Andrew is skeptical.

  "I think the dirty secret of this space is that people figured out a way to do this like 50 years ago and it just works better than a lot of the things that people have tried to innovate and bring to it." — Andrew Beer (37:22)

• Concentration Over Diversification (To a Point):
  Too many micro-bets don’t necessarily improve outcomes. The most effective strategies often hinge on big, liquid markets.

6. Fees & Access (32:11, 33:34)

• Fee Sensitivity:
  While 85 basis-point ETFs are competitive against expensive mutual funds, getting managed futures approaches into model portfolios dominated by ultra-low fee ETFs (≤20 bps) is still a leap. Making the product index-based, passive, and tax efficient is essential to broader adoption.

  "If you can make it more tax efficient, it opens up a whole new segment of the market..." — Andrew Beer (35:34)

7. Product Structure & Replication (48:34)

• Indexing and Replication:
  Andrew's firm focuses on creating index-like products that replicate core exposures of leading managed futures or hedge funds, with the aim of delivering most of the value (beta plus some alpha) in a liquid, low-fee, accessible format.

  "Our big innovation was that... we've been able to replicate [hedge fund returns]... but do it so efficiently, we'll give you nine or eight, not five." — Andrew Beer (53:28)

8. Real-World Example: Current Positioning (54:54)

• Managed Futures Positioning (as of recording):
  Recently, systematic "trend" models are positioned risk-on: long equities, bullish on gold and the yen, not worried about rising bond yields. Fundamental hedge fund managers are more cautious, shifting into Europe, watching macro risks.

9. The Path to Mainstream (60:41)

• How Managed Futures Go Mainstream:

  1. Show up in more model portfolios (industry is trending there).
  2. Improve the way they’re talked about—outcomes, not technical stats.
  3. Make them easy to buy and understand—simple vehicles, clear allocation.

  "If you believe in math, then you have to believe in this." — Recalling Meb Faber (61:26)

Notable Quotes & Memorable Moments

• On Managed Futures as a 'Crystal Ball':
  "Sometimes the crystal ball can be very cloudy, right? So sometimes it can look more like a snow globe than a crystal ball." — Andrew Beer (05:42)

• On Wall Street Jargon and Client Mindset:
  "People want to be told about the outcomes and why it fits in their portfolio and why it's going to help them and how it's going to help them grow their assets and sleep at night." — Andrew Beer (17:35)

• On the Need for Simplicity:
  "Can we just make it as simple as buying a low cost ETF?... As a starter kit, can we have a simple plug and play solution that gets you essentially what you're looking for from a diversification perspective?" — Andrew Beer (31:15)

• On the Mainstream Future:
  "If we can kind of solve all those issues, then what you'll see is the space will... gradually just become a 3% allocation across more and more portfolios. 5% allocation, sometimes 10%..." — Andrew Beer (60:41)

• On Longevity:
  "It's very rare to have a strategy that's worked for 50 years." — Andrew Beer (61:33)

Timestamps for Key Segments

• [03:38] — What are Managed Futures?
• [07:31] — Asset Classes & How Trend Following Works
• [12:52] — Why Add Managed Futures? Statistical perspective
• [16:30] — The Narrative Problem: Too much focus on complexity
• [18:24] — Real-world benefit vs. explaining the "how"
• [23:10] — Behavioral challenges: 'Line item risk'
• [27:43] — Framing managed futures as an asset allocation decision
• [32:11] — Fee sensitivity, product design, and market fit
• [37:07] — The "rush to complexity" trend
• [48:34] — Hedge fund replication made simple
• [54:54] — Manager positioning: What are the trend followers and fundamentals guys doing now?
• [60:41] — How managed futures go mainstream

Summary & Takeaways for Listeners

• Managed futures are a time-tested diversifier, especially valuable when stocks and bonds falter.
• Adoption lags because they're complex to explain, behaviorally hard to "stick with," and too often sold via abstract technical stats—not practical benefit.
• The path to mainstream acceptance lies in new product design: simple, index-like, fee-conscious, and tax-efficient structures, paired with better narratives for the actual human investors using them.
• Andrew advocates for reframing managed futures in the client conversation, focusing on real-world outcomes and making their inclusion in portfolios as easy and intuitive as owning a broad index fund.

Find Andrew Beer: LinkedIn, Company website: dbi.com