A strong argument could be made that stocks and bonds are approaching a secular peak. If these two asset classes are indeed near the end of their respective bull markets, investors should consider exploring other asset classes and investment strategies.
For example, mutual funds that provide exposure to a mixture of stocks, bonds and commodities could very well lay the groundwork for outperforming the major stock market averages.
Catalyst/Milburn Hedge Strategy Fund (NASDAQ:MBXIX) was launched on 1 January 1997 and has generated an annualized return of 10.9% since inception which rivals the 9.5% return of the S&P 500 over that same period. MBXIX employs a hybrid equity/futures strategy designed to outperform a typical long-only equity investment strategy over a full cycle, including reducing drawdowns during sustained periods of stock market declines.
The most distinctictive achievement of the fund is that it both outperformed the S&P since inception while generating positive performance in equity bear markets like 2000, 2001, 2002, and 2008. The fund has maintainted double digit annualized returns since inception without a single double digit negative calendar year. 
MBXIX is a highly diversified fund based on its ability to invest in over 125 different futures markets. These markets consist of global equities, currencies, interest rate products and a basket of commodity futures contracts in metals, agriculture and energy.
In order to properly manage its portfolio, MBXIX uses a 100% systematic strategy driven by machine learning. Specifically, the portfolio consists of an active long/short futures & forex component mixed with a strategic equity exposure component. One of the keys to the long-term success of the fund is its ability to invest in agriculture commodities, forex, metals and energy.
Typically, these types of alternative investments in managed futures have a tendency towards negative correlation with traditional investments like stocks and bonds during periods of crisis. This explains why MBXIX has the ability to perform well in both bull markets and bear markets. The fund has proven its ability to perform particularly well in prolonged bear markets. For example, following the internet mania of the late-1990s, the S&P 500 declined for three consecutive years from 2000 through 2002. The combined loss was (43.09%).
During the same time period, MBXIX generated a positive rate of return of 21.83%. The global financial crisis in 2008-09 was another difficult time for equity investors.
The S&P 500 recorded a brutal decline of (37.00%) in 2008. This marked the worst annual slump in the stock market since 1937. Despite the fact that a financial crisis was causing historic declines in global equity markets, MBXIX produced a return of 5.33% in 2008, substantially outperforming the S&P 500.
In addition to performing exceptionally well in bear markets, MBXIX has achieved impressive results in bull markets. Several significant rallies have unfolded during the past two decades. Examples include 1998, 2009, 2017 and 2019. The average annual rate of return during this period of time was 14.14% for Catalyst Millburn.
The uncorrelated nature of the strategy has enabled it to generate strong positive returns in both bull and bear markets. An important characteristic of a successful investment vehicle is the ability to achieve consistent performance results.
MBXIX has produced very consistent results throughout its trading history. The fund has yielded only three single digit losing years despite the fact that equity markets have endured several brutal drawdowns since 1997.
Even more impressive is the fund’s performance over a 5-year rolling period. MBXIX has never recorded unprofitable results over any 5-year rolling period since its inception in 1997. One of the highest honors any mutual fund can achieve is a 5-star rating from Morningstar. MBXIX has garnered several 5-star ratings from Morningstar. MBXIX is rated 5 stars based on risk-adjusted returns in Morningstar’s macro trading strategy category. Navigating The Future Investment Landscape
Nobody has a crystal ball. It’s impossible to forecast the future direction of financial markets. However, based on G20 central banks’ aggressive monetary policy following the global pandemic, it’s probably safe to assume that several asset classes could experience a fair amount of volatility during the next several years. Of course, volatility provides opportunity for those who are properly positioned to capitalize on it.
In 2001, commodities entered a new secular bull market. The first phase of the bull market ended in April 2011. The second phase began in March 2020 with a new cyclical bull market, precisely when G20 central banks introduced aggressive money printing programs in response to the global pandemic. Typically, secular commodity bull markets will continue for 30 to 40 years. Therefore, the current bull market in commodities is likely to persist for the remainder of this decade.
Unlike many mutual funds, MBXIX could potentially benefit from the bull market in commodities based on the fact that the fund has direct exposure to this asset class. Investors with a 60/40 portfolio or long-only equity portfolio may want to consider allocating a percentage of their investment dollars into a mutual fund like MBXIX.
Catalyst Millburn is clearly not another typical boring mutual fund with a handful of stocks held inside. Instead, MBXIX provides its investors with exposure to over 125 different markets, thus creating a level of diversification not found in most mutual funds. Based on its impressive performance results and exposure to multiple asset classes, investors should seriously consider adding MBXIX to their portfolio.
