Commodities: Fighting Inflation with Diversification
Why Investors Trust the Commodity Experts Behind the Catalyst/
Millburn Commodity Strategy Fund (DCXIX) – Especially in Volatile and
When a balanced 60% equity/40% fixed income allocation fails investors like in 2022, those looking for strategies to strengthen their portfolio – especially during periods of persistent inflation – should consider alternative
approaches. Today, we’d like to share why we believe commodities are a valuable diversifier to your stock/bond investment approach.
With few exceptions, higher core inflation:
- Has resulted in a positive correlation between returns of stocks and bonds,
- Means that a traditional portfolio may not deliver the desired diversification benefits.
High Inflation Has Eroded Traditional Portfolio Diversification
3-YEAR TRAILING MONTHLY STOCK-BOND CORRELATION VS. AVG. CORE INFLATION RATE OVER SAME PERIOD
Source: Bloomberg. SBBI Ibbotson US Large Stocks and US LT Govt prior to 1989.
Past performance is not indicative of future results.
One alternative asset class investors can consider during periods of persistent inflation is commodities, which have historically been uncorrelated to stocks and bonds and have been instead often highly correlated with inflation and moves in the U.S. dollar.
As outlined in the chart below, commodities have even outperformed gold in all types of inflationary environments.
Source: Allianz Global Investors
Millburn: The Commodity Experts Behind DCX
The Catalyst/Millburn Dynamic Commodity Strategy Fund (DCXIX) is sub-advised by the Millburn Ridgefield Corporation – one of the few commodity-focused managers to have traded successfully through multiple cycles dating back more than five decades – including during the major commodity moves of the 1970s, the late 1980s, the mid-1990s through 2008, and, most recently during 2021 and early 2022.
You may already recognize Millburn as the managers of the Catalyst/Millburn Hedge Strategy Fund (MBXIX), which has assets north of $6 billion (as of September 2023). MBX highlights Millburn’s long-term track record and experience, which in the case of DCX, is paired with a sophisticated quantitative investment approach to develop a global, diversified portfolio for investors that we believe stands out compared to other managers – especially in the commodities investment space.
The portfolio management team took over the Strategy on June 1, 2021, and have outperformed benchmarks through this volatile period ever since and changed the direction of the Fund.
THE RESULTS OF MILLBURN’S INNOVATIONS
Millburn’s innovations and performance since their takeover make this Fund a worthwhile consideration for those seeking to take advantage of the benefits of commodity investing, especially during inflationary or turbulent markets, as evidenced below:
DCX Performance Before and After Millburn’s Takeover
Keys to DCX Performance:
- The Strategy combines an active, tactical futures component with a more passive, strategic equity component in a single, unified, risk managed portfolio.
- The futures component can take long or short positions, as determined by Millburn’s trend-following, carry and machine learning systems.
- The portfolio is long-biased, expecting to meet or exceed general commodity market returns during periods of prolonged uptrend while maintaining the ability to mitigate, or even profit, during periods of commodity market downturns.
A DIVERSIFIED INVESTMENT APPROACH
DCXIX allocates across the global investment universe – not only providing diversification by adding alternatives to your portfolio, but also seeking opportunities across different commodity markets.
Learn how this commodity-focused allocation can fit into your investment program today by visiting catalystmf.com or by reaching out to your regional Catalyst representative today.
Data as of quarter end: 2023-09-30T00:00:00
Annualized if greater than a year
|Share Class||1 Month||3 Months||6 Months||YTD||1 Year||3 Years Annualized||5 Years Annualized||10 Years Annualized||Since Inception Annualized|
|Class A w/Sales Load||-5.50%||-2.23%||-7.49%||-8.37%||-5.04%||1.22%||1.58%||N/A||1.63%|
There is no assurance that the Fund will achieve its investment objective.
The Fund’s maximum sales charge for Class “A” shares is 5.75%. Investments in mutual funds involve risks. Performance is historic and does not guarantee future results. Investment return and principal value will fluctuate with changing market conditions so that when redeemed, shares may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. To obtain the most recent month end performance information or the Funds prospectus please call the Fund, toll free at 1-866-447-4228. You can also obtain a prospectus at www.CatalystMF.com.
Investors should carefully consider the investment objectives, risks, charges and expenses of the Catalyst Funds. This and other important information about the Fund is contained in the prospectus, which can be obtained by calling 866-447-4228 or at www.CatalystMF.com. The prospectus should be read carefully before investing. The Catalyst Funds are distributed by Northern Lights Distributors, LLC, member FINRA/SIPC. Catalyst Capital Advisors, LLC is not affiliated with Northern Lights Distributors, LLC.
You cannot invest directly in an index and unmanaged index returns do not reflect any fees, expenses or sales charges.
Past performance is not a guarantee of future results.
Investing in the Fund carries certain risks. The Fund will invest a percentage of its assets in derivatives, such as futures and options contracts. The use of such derivatives and the resulting high portfolio turnover may expose the Fund to additional risks that it would not be subject to if it invested directly in the securities and commodities underlying those derivatives. The Fund may experience losses that exceed those experienced by funds that do not use futures contracts, options and hedging strategies. Investing in commodities markets may subject the Fund to greater volatility than investments in traditional securities. Changes in interest rates and the liquidity of certain investments could affect the Fund’s overall performance. The Fund is non-diversified and as a result, changes in the value of a single security may have significant effect on the Fund’s value. Other risks include U.S. Government securities risks and investments in fixed income securities. Typically, a rise in interest rates causes a decline in the value of fixed income securities or derivatives owned by the Fund. Furthermore, the use of leveraging can magnify the potential for gain or loss and amplify the effects of market volatility on the Fund’s share price. The Fund is subject to regulatory change and tax risks; changes to current rules could increase costs associated with an investment in the Fund. These factors may affect the value of your investments.
Alternative investments may not be suitable for all investors and an investment in alternative funds is suitable only for investors who can bear the risks associated with the illiquidity of the fund’s shares and should be viewed as a long-term investment.