Allocating to Hybrid Strategies
What Golf and Investing Can Tell Us About the Benefits of a Hybrid Approach

August 2019

If you are a golfer, there is a good chance you have a hybrid club in your bag. Despite being practically nonexistent 20 years ago, hybrid golf clubs are now used by most professional golfers, regularly part of a golfer’s set, and in two-thirds of golf iron sets sold today. A hybrid golf club borrows designs from both irons and woods. It was created out of a need to get more versatility and consistency. This offers an interesting parallel to investing. Hybrid investment strategies, especially those that combine equities and managed futures, offer many potential advantages in today’s market environment, including:

1. You don’t need to give up your equity exposure. The bull market is long in the tooth, but many financial advisors find it difficult to simply get out of equities.

2. You get a potential tail risk hedge. Historically, managed futures have performed well in periods of market turmoil. A managed futures strategy overlay on an equity portfolio provides the potential for meaningful positive returns in the overall portfolio even during equity market declines.

3. You get more notional exposure for each dollar invested. Because managed futures strategies can provide notional leverage in an uncorrelated manner, it’s possible to get well over $1.00 of exposure for each $1.00 you invest.

In this report, we use the Catalyst/Millburn Hedge Strategy Fund (MBXIX) as a case study to highlight the potential benefits of hybrid strategies. MBXIX has a 22+ year track record, produced positive returns in 2000-2002 and 2008, and has outperformed the S&P 500 TR Index since inception.

The Fund’s investment objective is long-term capital appreciation.



  1. Hybrid strategies seek to provide investors an option for more versatility in their portfolios, including the potential to participate in equity upside while still maintaining a tail risk hedge.
  2. As a fund implementing a hybrid strategy with a 22+ year track record, MBXIX has outperformed the S&P 500 TR Index while generating positive returns during both bear markets.
  3. We believe the key to success with hybrid strategies is taking a long-term allocation approach. Hybrid strategies are not designed to react to short-term noise, but rather structural market changes.
  4. Like many investment strategies, hybrid strategies will also likely experience drawdowns, which may offer compelling entry points for increasing an allocation.

Example Hybrid Strategy Portfolio Blend

Hybrid Strategy Historical Outcome: More Consistent Rolling 5-Year Returns
MBXIX Rolling 5-Year Return Analysis (January 1997 – June 2019)

MBXIX S&P 500 TR Index
Number of 5-Year Periods 211 211
Average 5-Year Annualized Return 10.26% 6.33%
Best 5-Year Annualized Return 18.02% 23.00%
Worst 5-Year Annualized Return 2.91% -6.63%
Standard Deviation of 5-Year Periods 2.99% 6.97%
Profitable Periods (%) 100% 77%
Average Profitable Period Return (Annualized) 10.26% 8.79%
Unprofitable Periods (%) 0% 23%
Average Unprofitable Period Return (Annualized) N/A -1.81%

Performance (%): Ending June 30, 2019
Annualized if greater than a year

Share Class 1 Year 3 Years Annualized 5 Years Annualized 10 Years Annualized Since Inception Annualized
Class I 6.42% 7.11% 9.90% 9.29% 10.95%
S&P 500 TR Index 10.42% 14.19% 10.71% 14.70% 8.34%
ML 3 Month T-Bill Index 2.31% 1.38% 0.87% 0.49% 2.21%
Class A 6.13% 6.84% N/A N/A 9.86%
Class C 5.37% 6.05% N/A N/A 9.03%
S&P 500 TR Index 10.42% 14.19% n/a n/a 13.05%
ML 3 Month T-Bill Index 2.31% 1.38% n/a n/a 1.23%
Class A w/Sales Load 0.03% 4.75% N/A N/A 8.02%

The Fund’s maximum sales charge for Class “A” shares is 5.75%. Gross expense ratios for the fiscal year were 2.25%, 3.00% and 2.00% for Class A, C and I shares, respectively. 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 In the case of investments at or above the $1 million breakpoint, a 1.00% contingent deferred sales charge (“CDSC”) may be assessed on shares redeemed within two years of purchase.

There is no assurance that the Fund will achieve its investment objective. You cannot invest directly in an index and unmanaged index returns do not reflect any fees, expenses or sales charges

Important Risk Information

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 funds’ shares and should be viewed as a long-term investment. Past performance is no 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 turn-over 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. Currency trading risks include market risk, credit risk and country risk. Foreign investing involves risks not typically associated with U.S. investments. 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 investment.

Performance shown before December 28, 2015 is for the Fund’s Predecessor Fund (Millburn Hedge Fund, L.P.). The prior performance is net of management fees and other expenses including the effect of the performance fee. The Predecessor Fund had an investment objective and strategies that were, in all material respects, the same as those of the Fund, and was managed in a manner that, in all material respects, complied with the investment guidelines and restrictions of the Fund. From its inception through December 28, 2015, the Predecessor Fund was not subject to certain investment restrictions, diversification requirements and other restrictions of the 1940 Act of the Code, which if they had been applicable, might have adversely affected its performance. In addition, the Predecessor Fund was not subject to sales loads that would have adversely affected performance. Performance of the predecessor fund is not an indicator of future results.


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