Managed futures are strategies that use futures contracts to take long and short positions across markets such as equities, bonds, currencies and commodities. The best-known approach is trend following, where the strategy tries to participate in persistent price moves rather than predict the economy directly.

Their appeal is diversification. Unlike traditional equity and bond funds, managed futures are not dependent on markets rising and can potentially benefit from falling prices as well as rising prices. However, they are not portfolio insurance. They can struggle in choppy or trendless markets, and their ‘crisis alpha’ is not guaranteed. Used carefully, their role is best understood as a diversifying return stream rather than a replacement for equities or bonds.

Bonds are often treated as the safe, defensive part of a portfolio, but that description can hide an important distinction. A short-duration government bond fund and a long-duration gilt fund are not simply different versions of the same thing; they can behave very differently when interest rates move. Duration is the key measure: the longer the duration, the more sensitive the bond’s price is to changes in yields.

The experience of long-dated gilts in 2022 showed this clearly. Rising yields led to large falls in long-duration bond funds, with losses that looked much closer to equity-market drawdowns than many investors would expect from ‘safe’ assets. This does not mean long-duration bonds are bad, but it does mean investors need to be clear about the role bonds are meant to play. For capital preservation, spending needs and portfolio stability, shorter-duration bonds may be better aligned with the job investors usually expect their defensive assets to do.

Complex investment strategies are not necessarily bad, but they often make risk harder to see and understand. A 3x leveraged S&P 500 strategy can look attractive in a strong decade, yet it is not simply ‘the S&P 500, but more of it’. It is a financed derivative position where gains, losses, costs and behavioural pressure are all magnified.

The real test is not whether equities rise over the long term, but whether the strategy can survive the period. Financing costs can materially reduce returns, drawdowns can become intolerable, and a bad decade can wipe out the investor before any recovery arrives. For most long-term investors, simplicity is not a weakness; it is often what allows them to stay invested.

Indexing is not ‘breaking’ markets simply because passive funds own a growing share of them. Prices are set by trading, not by ownership, and active investors still do the vast majority of price discovery. That means the key question is not how much of the market is indexed, but whether enough active capital remains to keep prices tied to fundamentals.

Even if passive investing did begin to create distortions, those mispricings would themselves attract active managers seeking profit. In that sense, the system is partly self-correcting. Rather than destroying market efficiency, the rise of indexing may simply be pushing out weaker active managers whilst leaving enough skilled investors in place to keep markets broadly efficient.