Wall Street Is Quietly Burying the 60/40 Portfolio. Here Is What Is Replacing Your Bonds.
Bonds are paying the best yields in years and still dragging portfolios into the red, leaving investors scrambling for a defensive asset that actually defends. A growing group of Wall Street managers thinks the answer involves shorting Treasuries outright.
Investors put more than $75 billion into fixed income ETFs over the past month. Nate Geraci, president of NovaDius Wealth Management, said on October 12, 2026 that inflows for the year have reached a record $525 billion.
Over the same period, the broad U.S. bond index is down 2.32% this year and long-term Treasuries are down 7.32%. People are buying bonds to collect yield, and far fewer expect them to offset a stock decline.
Geraci sees room for a different kind of defense: “Something like managed futures ETFs, I think, can fit the bill here because they can go short bonds. They can go long the dollar, long oil. They can be a diversifier when other areas of the portfolio aren’t working.”
Five funds lead that category for individual investors: iMGP DBi Managed Futures Strategy ETF (NYSEARCA:DBMF), KraneShares Mount Lucas Managed Futures Index Strategy ETF (NYSEARCA:KMLM), Simplify Managed Futures Strategy ETF (NYSEARCA:CTA), WisdomTree Managed Futures Strategy Fund (NYSEARCA:WTMF) and First Trust Managed Futures Strategy Fund (NYSEARCA:FMF). Each can be weighed on whether moving it into the defensive side of a 60/40 portfolio solves the problem.
Bonds Still Pay Income but Stopped Protecting Stocks
The 10-year Treasury yielded 5.22% on October 8, and the 30-year yielded 5.60%. At those rates, anyone buying a new bond today earns real income.
Over the past year, the 10-year went from a low of 3.97% in February to a high of 5.31% on October 5, a rise of 1.34 percentage points. A higher yield helps whoever buys a new bond, but it pushes down the price of every older bond paying less, which explains how total returns turned negative in the same year income improved. Correlation is a bigger problem, because when inflation drives a selloff, stocks and bonds fall together, and a hedge that moves with the asset it protects offers very little protection.
Stocks have held up anyway, with the S&P 500 up 14.1% this year. That leaves the bond portion as a drag on returns that has yet to prove it can protect.
How Managed Futures Can Profit From Rising Rates
A managed futures fund follows price trends in currencies, commodities, interest rates and stock index futures. It buys what is rising and sells short what is falling, and it can take a short position as easily as a long one. Because it can go short, the fund can hold short bond futures when rates climb and profit from the same move that hurts your bond fund.
This year shows how that works, with the iMGP DBi fund up 20.31% and KraneShares up 20.77%. KraneShares trades only currencies, rates and commodities, with no equity exposure.
Most of the money sits in Treasury bills held as collateral. At the end of June, one bill position made up 52.68% of iMGP DBi’s net assets.
Drawbacks That Deserve Your Attention
Trend followers lose money in choppy markets because trends reverse before they can pay off. Simplify fell 1.77% over the past month, although it is still up 13.39% for the year.
KraneShares charges a 0.9% expense ratio, many times what a bond index fund costs. Funds built on futures also tend to have more complicated tax treatment.
Results vary widely between funds. WisdomTree is up 12.36% this year, compared with nearly 21% at KraneShares, so the category name tells you little about what you own.
Long-term records are modest, with WisdomTree up 43.83% over 10 years and First Trust up 37.49%. Those totals include long flat periods that make the funds hard to keep holding.
Timing matters most near retirement. A fund that works on a 10-year average but loses for three straight years forces a retiree drawing income to sell low, while a younger saver has time to hold through the losses. That is the sequence-of-returns problem, and we walked through how to defend the first years of withdrawals in a free guide here.
Simpler Options May Work Better
The three-month Treasury bill yielded 4.25% on October 9, with almost no interest-rate risk. For steady income and easy access to cash, bills offer a simpler profile than managed futures.
Longer-term bonds tend to benefit when yields come down. Long bonds rise in price when yields fall, and in the meantime they continue to pay interest. Managed futures are most relevant during an inflation-driven selloff that hits stocks and bonds at once.
Considering Managed Futures ETFs for a 60/40 Portfolio
The bull case rests on low correlation to stocks and bonds and on the ability to profit from rising rates, which offers a working answer to stocks and bonds falling together. The bear case is that you pay high fees, you take whipsaw losses in choppy markets, results vary widely between funds, and it is hard to keep holding a fund that loses while everything else gains.
For investors exploring the category, managed futures are most often discussed as a modest slice of the defensive side of a portfolio, funded mostly from long bonds, with Treasury bills and intermediate bonds covering the rest. iMGP DBi stands out for its size, with about $3.89 billion in net assets, and KraneShares carries no stock exposure.
Contact [email protected] for any questions or corrections.
Omor Ibne Ehsan is a writer at 24/7 Wall St. He is a self-taught investor with a focus on growth, cyclical, and dividend equities that have strong fundamentals, value, and long-term potential. He also has an interest in high-risk, high-reward investments such as penny stocks.
