(Dow Jones) A Rydex fund that sparkled during the market's blackest hours in 2008 is struggling to recapture the magic.

The Rydex/SGI Managed Futures Strategy Fund uses a computer-driven strategy to make both bullish and bearish bets on commodities and currencies. It is designed to let more people make a type of investment-managed futures-that is usually open only to rich investors. The strategy doesn't aim for huge gains but instead tries to dodge market swings and provide returns that aren't tied to stock and bond markets.

The fund seems like an appealing insurance policy against market crashes but its lack of a track record means it also adds an element of uncertainty to portfolios.

Because the fund has basically no correlation to stocks, Nick Smith, a portfolio manager at Steele Capital Management Inc. in Dubuque, Iowa, said he uses the Rydex fund to diversify about 5% of client portfolios.

The Rydex fund tracks an indicator of 24 futures contracts designed by Standard & Poor's Corp. The weightings are fixed-with 50% invested in physical commodities, such as energy (such as heating oil, light crude, natural gas and gasoline), precious metals, copper, cocoa, coffee and livestock, and 50% in currencies and Treasurys.

But the fund switches between long and short bets on these sectors based on pricing trends, attempting to capitalize on both rising and falling markets. It avoids short bets on energy, which are considered too risky.

The strategy worked well in 2008. The fund posted a 7.7% return in a year when the stock market plunged 37%, helping it gain $2.3 billion in assets. Since then, it has hit a dry spell, posting negative returns of 5% in 2009 and 5.7% so far this year.

The fund hasn't been able to grab onto any strong trends recently, said Cliff Short, a portfolio manager at Clermont Wealth Strategies, in Lancaster, Pa., who also uses the fund with clients and who doesn't have any second thoughts about using it.

The sideways markets of late aren't well suited to its strategy, Rydex said of its recent performance.

The declines call into question what kind of trade-off between risk and reward that investors can expect from the strategy in the long run. Since it launched in 2007, the fund doesn't have much of a track record. The S&P indicator it follows--the Diversified Trends Indicator-had returns ranging between 5.7% to 14% each year from 2004 and 2007. Simulated returns for the fund stretching back to 1985 show similar annual results, although such numbers reflect the benefit of hindsight.

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