MutualFundWire.com: After the Passing of Their Creator, Do Managed Funds Have a Future?

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Monday, June 24, 2013

After the Passing of Their Creator, Do Managed Funds Have a Future?

After the recent passing of their creator, managed futures now seem to have a future--something that many in the industry thought was unlikely.

Two Dow Jones writers explore the ups and downs of the fund category.

Daisy Maxey penned an in-depth story about the increasing, then decreasing popularity of managed future funds for this morning's WSJ.

Maxey writes that the high fees of some managed future funds are turning off advisers and prompting warnings from analysts, the reported. But the funds are becoming appealing again:

In the article, Jeffrey Watts of Watts Gwilliam & Co. said that fees can be an issue--something advisers have to pay attention to. "But we know why we own [MutualHedge Frontier Legends Fund] so we accept the good and the bad," he said. "Some advisers will run away from them right now, and will run to them when it's too late."

Meanwhile, Brendan Conway of Barrons says it's about time that managed futures received some attention from investors. Conway highlighted Wisdom tree Managed futures Strategy Fund, which was ahead of 1.3 percent on Thursday.

The funds are the legacy of Mathew Gladstein, a Wall Street executive who worked with Nobel laureate economists Robert Merton and Myron Scholes to bring options trading to regular folk and launch the first mutual fund based on the instruments. Gladstein died in his sleep on June 18 at the age of 90, according to Bloomberg.

Gladstein, who had originally worked at Donaldson Lufkin & Jenrette, founded with Merton and Scholes the Money Market/Option Investments Inc., the first public mutual fund with a strategy focused on options.

The fund failed because of lack of funds, according to The Derivatives Sourcebook, written in part by Merton and Scholes.

They described the fate of the fund in this way:

In early 1976, we attempted to launch Money Market/Options Investments under the auspices of Phoenix Investment Counsel of Boston. Unfortunately, the fund raised only a small amount of money.