New York (HedgeCo.net) – One of the top performing mutual funds for 2015 is one that takes a page out of the hedge fund playbook. The Catalyst Macro Strategy fund, an actively traded alternative mutual fund, is producing very strong returns by taking advantage of flaws in the design of certain exchange traded funds.

According to a recent report from Reuters, the fund has approximately $155 million in assets under management and is up 47% over the past year. The returns have come from a strategy of using options to make bearish bets on leveraged ETFs that are leveraged by multiples of two or three.

The Catalyst Macro Strategy fund is managed by David Miller and it takes advantage of what he calls “structurally flawed” ETFs. According to the article, Miller has approximately 100 of these funds that he uses as the foundation for his trading strategy. Miller states that the funds are poorly designed because the compounding effect wipes out an investors gains over time.

Whatever he is doing, it is working. The 47% return over the past year makes the fund the best performing actively-managed mutual fund tracked by Morningstar during that period. Normally we see hedge funds as the ones that take advantage of flaws such as this, but in this case it is a mutual fund.

Rick Pendergraft
Research Analyst
HedgeCoVest