MW This hedge-fund style ETF is aimed at investors looking to diversify in volatile markets. Here's what to look for.

By Christine Idzelis

BlackRock's iShares Managed Futures Active ETF begins trading Thursday

Markets have been volatile this year, with some investors turning to alternative strategies for diversification as those increasingly become available to the masses.

For example, BlackRock just launched an exchange-traded fund with a trading strategy used in its hedge-fund business. The firm's new iShares Managed Futures Active ETF is the latest managed futures fund rolled out to ordinary individual investors, as more asset managers appear to be responding to an increasing appetite for hedge-fund-style strategies.

Investors may be hoping that managed futures will produce gains even when traditional stock and bond markets are falling.

The iShares Managed Futures Active ETF ISMF, which uses futures contracts to take long and short positions across various asset classes including commodities, currencies, stocks and bonds, begins trading on Thursday, according to Jon Diorio, head of alternatives for the U.S. wealth-advisory business at BlackRock.

"It's a diversified alternative strategy," Diorio said in a phone interview. "The goal is to make money regardless of the market environment."

Volatility in the U.S. stock market has recently climbed amid fears that tariffs risk hurting economic growth and increasing inflation that's stuck above the Federal Reserve's target. This month the Cboe Volatility Index VIX has jumped more than 23% through Wednesday, while the S&P 500 SPX has slumped 6%.

BlackRock's new active ETF may serve as a hedge in portfolios, as it seeks a "differentiated return stream" that's uncorrelated with traditional stock and bond markets, according to Diorio. In periods of "market stress," he said, the managed futures strategy is designed to provide gains.

Managed futures strategies, long associated with the hedge-fund world accessed by institutional investors, are becoming increasingly available to individual investors in the ETF industry.

Invesco and Fidelity have filed with the Securities and Exchange Commission to launch managed futures ETFs, according to Bryan Armour, Morningstar's director of passive strategies research for North America.

Managed futures ETFs attracted $454 million in the first two months of this year, after seeing in 2024 their second-best year of inflows at $992 million, he told MarketWatch in an email. By his tally, their biggest year of inflows was in 2022, when managed futures ETFs took in $1.57 billion.

"Managed futures can offer diversification benefits to portfolios, so I expect investor interest amid the market volatility," Armour said of the general strategy.

In 2022, both stocks and bonds tanked as surging inflation prompted the Federal Reserve to hike interest rates. During that same rough year for markets, the iMGP DBi Managed Futures Strategy ETF DBMF saw a strong gain, returning a total 21.5%, according to FactSet data.

So far in 2025, the U.S. market has posted losses while bonds are up.

But the iMGP DBi Managed Futures Strategy ETF has lost 4.1% this year through Wednesday, while some other managed futures ETFs are also down, FactSet data show. For example, the WisdomTree Managed Futures Strategy Fund WTMF has fallen 2.8% year to date, while the First Trust Managed Futures Strategy Fund has lost 3.2% over the same period.

But not all managed futures strategies are struggling this year. The Simplify Managed Futures Strategy ETF CTA is up 4.4% so far this year through Wednesday, according to FactSet data.

Check out: Get ready for another mutual fund with a hedge-fund-style strategy. What investors need to know.

BlackRock's iShares Managed Futures Active ETF is an actively managed systematic fund that captures "trend-following" signals across asset classes, according to Diorio.

"If you get very quick trend reversals," managed futures strategies might not perform as well as when there's "an established trend," he said. "The manager matters."

BlackRock's new managed futures ETF has an expense ratio of 0.8%, according to Diorio.

The giant asset manager has been running a managed futures strategy "as a part of our broader hedge-fund business," he said, but this is the first time that BlackRock is offering it broadly to individual investors.

-Christine Idzelis

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March 13, 2025 10:39 ET (14:39 GMT)

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