Mount Lucas ETF Captures Risk Premiums via 22 Liquid Futures Markets
KMLM•KMLM tracks a 1988-built Mount Lucas Managed Futures Index across 22 liquid futures markets, including U.S. Treasuries, commodities and currencies to systematically capture risk premia. The fund excludes equities to enhance diversification and leverages increased liquidity in stress periods for alpha opportunities.
1. Strategy Origins
Mount Lucas Management spun out from Commodities Corp in 1986 and developed the flagship MLM Index in 1988 to systematically own futures price risk in exchange for a long-term risk premium. The managed futures strategy was brought into an ETF wrapper with the launch of KMLM in 2020.
2. Market Exposure
KMLM tracks the MLM Index across 22 of the deepest, most liquid futures markets worldwide, including U.S. Treasuries, U.K. Gilts, Japanese government bonds, Canadian government bonds, major currencies such as the yen, euro and Canadian dollar, and commodities like crude oil, gold, soybeans and wheat.
3. Liquidity and Diversification
The fund’s systematic trend-following approach benefits from futures markets that often deepen liquidity during periods of market stress, making the diversification benefit truly actionable when risk off environments arise.
4. Equity Exclusion Rationale
KMLM deliberately omits equities to avoid duplicating exposure investors already obtain elsewhere, sacrificing some upside in benign markets in favor of sharper diversification and alpha generation during turbulent market conditions.
