The panelists commented that the era of loose monetary policy is slowly coming to an end, and that the bull market is past its prime. Bergin argued that markets and asset classes were decoupling as correlations were breaking down.

Szilagyi said that advisors who use managed futures are struggling to keep their clients allocated to the strategies, as many investors push to liquidate their low performing allocations.

Marty Bergin, president at Dunn Capital Management, says the problems are compounded because the industry has done a poor job of educating advisors and investors about alternatives. While clients are comfortable with long-only mutual fund and index strategies and building asset allocations based on a target rate of return, they have more difficulty understanding strategies like managed futures, which target risk.

“The argument for managed futures is that you never perform as badly as the S&P 500,” said Bergin. “It’s an educational bottleneck, a completely different way of looking at allocation, and thus the return stream is different from anything (advisors and investors) may have seen.”

Historically, managed futures have delivered on their promise to perform well during bear markets. In 2008, amid the global financial crisis, managed futures strategies returned an average of 14.1 percent. In the same period, the S&P 500 lost 36.5 percent, its second worst year since the 1929 stock market crash.

Yet investors who wait for a bear market may miss out on the diversification benefits of a managed futures strategy, as it provides an additional, uncorrelated asset to rebalance to and from as the market fluctuates, said Larry Kissko, client portfolio manager for Man AHL.

“The idea of a managed futures strategy helping out and providing diversification is still there,” says Kissko. “It’s a bit surprising, we have seemed to grow a bit unwary. In the 2000s, there was a lost decade for equities; they were flat, but it was rare for someone to come up to me and say, ‘I don’t want any more S&P 500.’ Nobody gave managed futures that kind of break.”

Managed futures strategies may create alpha over a long enough time, as many significantly outperform down markets, said Kissko, but most markets are only down one in every three to four years on average.

Under typical market cycles, the strategies are best held for at least three to five years, said Bergin of Dunn Capital.

“Even when they’re not overperforming, it does at least reduce your standard deviation and increase your risk-adjusted returns,” said Bergin. “Keep in mind that when we talk about these strategies not performing well, we’re talking about not performing as well as the S&P 500. If you’re serious about allocating to managed futures, you put it in a portfolio and leave it there as you rebalance.”