In recent months, stocks around the world have been heading in the same direction: down. That has investors searching for alternative assets...
In recent months, stocks around the world have been heading in the same direction: down. That has investors searching for alternative assets that zig when stocks zag. Two assets that have little correlation with stocks …
In managed futures funds, commodity-trading advisers buy futures contracts for currencies and commodities, such as oil or silver, betting that the underlying assets will rise or fall in value within a certain time frame. One provider, Rydex Investments, has funds based on the S&P diversified trends indicator index. Rydex says the index has a -0.08 correlation with the S&P 500. A correlation of 1.0 means two items move in lock step; a correlation of -1.0 means the two move in opposite directions. A reading of 0 means they have no direct relationship. The index likewise has a low 0.04 correlation with bonds, as measured by the Lehman aggregate bond index. Rydex Managed Futures Strategy Fund (RYMTX) has a 4.75 percent maximum front-end sales charge and expenses of 1.81 percent.
Master limited partnerships
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Units in these partnerships trade like stocks. MLPs pay out most of their cash flow through distributions similar to dividends. Most MLPs focus on natural resources and are exempt from corporate income taxes. Some distributions are treated as a return of capital, which allows an investor’s taxes to be deferred, so MLPs are best held in taxable accounts. MLPs have a 0.18 correlation with the S&P 500 and have outperformed the index every year since 2000, says Brian Kazanchy, who heads the investment committee of RegentAtlantic Capital. Wachovia analyst Yves Siegel favors big MLPs and those with limited financing needs that are boosting distributions. His top picks include Plains All American Holding (AHD) and Atlas Pipeline Holdings (AHD).