Escape the 60/40 Diversification Trap
Exploring Alternatives Like MBXIX Has Never Been More Important
April 2026
Every investor understands the need for diversification when pursuing their long-term goals.
While the traditional portfolio model, 60% stocks and 40% bonds, has historically provided diversification, this may no longer be the case. Becoming too comfortable with this traditional, outdated model is something we refer to as the 60/40 diversification trap.
As shown below, the correlation between stocks and bonds has increased significantly in the past few years.
How Has the Correlation Between Stocks and Bonds Changed Over Time?
Source: Catalyst Capital Advisors LLC & Bloomberg L.P. Rolling correlation data from 1/1/1997 to 3/31/2026. Correlation represents how two investments move together. A correlation of 1 signifies they move perfectly together. A correlation of −1 signifies they move completely opposite of each other. Stocks represented by the S&P 500 TR Index. Bonds represented by the Bloomberg U.S. Aggregate TR Index. *Averages are based on rolling 3-year (36-month) correlations. The average correlation was −0.09 for periods ending before 2022 and 0.58 for periods ending since 2022. Past performance is not a guarantee of future results. Please see the end of this presentation for important disclosures.
Why does this matter?
Because traditional portfolios are now less diversified, investors need to consider alternatives to achieve the diversification they once had. The Catalyst/Millburn Hedge Strategy Fund (MBXIX) is a relatively low-correlation alternative to both stocks and bonds.
Since 2022, amid rising stock-bond correlations, MBXIX has exhibited average rolling three-year correlations of 0.30 to equities and −0.31 to bonds.
MBXIX Has Outperformed Market Benchmarks Since Inception
Since inception, MBXIX has outperformed the S&P 500 TR Index and delivered positive returns in every structural bear market, including 2000–2002, 2008, & 2022.
Source: Catalyst Capital Advisors LLC & Bloomberg L.P. Data from 1/1/1997 to 3/31/2026. Y-axis represents a growth of $10K. 60/40 portfolio represented by a 60% allocation to the S&P 500 TR Index and a 40% allocation to the Bloomberg U.S. Aggregate Index. Past performance is not a guarantee of future results. Please see the end of this presentation for important disclosures.
MBXIX Has Generated Strong Returns During Market Stress Periods
Source: Catalyst Capital Advisors LLC & Bloomberg L.P. Y-axis represents total return. 60/40 portfolio represented by a 60% allocation to the S&P 500 TR Index and a 40% allocation to the Bloomberg U.S. Aggregate Index. Past performance is not a guarantee of future results. Please see the end of this presentation for important disclosures.
What makes MBXIX different?
The Fund combines two investment strategies, strategic equity exposure and active managed futures, into one portfolio. This composition has historically provided meaningful diversification when investors need it the most.
MBXIX's Portfolio Can Provide Long-Term Capital Appreciation
- Active, tactical, long/short futures & foreign exchange (FX) "absolute return" strategy
- Portfolio of global liquid instruments and strategies
- Can be either long or short any futures or FX market traded in the portfolio
- Has historically generated positive returns during structural bear markets for equities
Combined portfolio engineered to deliver equity-market participation alongside a true diversifier — independent return streams in one fund.
- Strategic portfolio consisting of long global and U.S. ETFs
- Provides access to benefits of being "long the market" over the long term
Can MBXIX become highly correlated to the market? While technically possible, we view this as somewhat unlikely because of the Fund's differentiated portfolio and fully systematic investment process.
MBXIX's Portfolio Can Provide Long-Term Capital Appreciation
MBXIX's sub-advisor, Millburn Ridgefield LLC, has developed a multi-feature investment model over the past ~50 years that continues to adapt to changing market conditions.
Summary
- The correlation between stocks and bonds has risen significantly since 2022, leaving many investors less diversified than they may realize.
- MBXIX is an alternative strategy designed to exhibit a relatively low correlation to stocks and bonds by combining strategic equity exposure with managed futures.
- MBXIX has outperformed the S&P 500 TR Index since inception, in part because of its ability to generate positive returns in both bull and bear markets.
- In light of rising stock-bond correlations, we believe investors should consider MBXIX as a way to achieve the diversification they once had.
There is no assurance that the Fund will achieve its investment objective. You cannot invest directly in an index and unmanaged index returns do not reflect any fees, expenses or sales charges. Performance shown before December 28, 2015 is for the Fund's Predecessor Fund (Millburn Hedge Fund, L.P.).
The Fund's maximum sales charge for Class "A" shares is 5.75%. Total operating expenses for the A, C, and I share classes are 2.25%, 3.00%, and 2.00%, respectively. Investments in mutual funds involve risks. Performance is historic and does not guarantee future results. Investment return and principal value will fluctuate with changing market conditions so that, when redeemed, shares may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. To obtain the most recent month end performance information or the Fund's prospectus, please call the Fund toll free at 1-866-447-4228. You can also obtain a prospectus at www.CatalystMF.com.
Past performance is not a guarantee of future results.
Investors should carefully consider the investment objectives, risks, charges and expenses of the Catalyst Funds. This and other important information about the Fund is contained in the prospectus, which can be obtained by calling 866-447-4228 or at www.CatalystMF.com. The prospectus should be read carefully before investing. The Catalyst Funds are distributed by Northern Lights Distributors, LLC, member FINRA/ SIPC. Neither Catalyst Capital Advisors LLC nor Millburn Ridgefield LLC, are affiliated with Northern Lights Distributors, LLC.
Risk Considerations
Investing in the Fund carries certain risks.
The Fund will invest a percentage of its assets in derivatives, such as futures, forwards and options contracts, and hedging strategies. The use of such derivatives and the resulting high portfolio turn-over may expose the Fund to additional risks that it would not be subject to if it invested directly in the securities and commodities underlying those derivatives. The Fund may experience losses that exceed those experienced by funds that do not use futures, forwards and options contracts, and hedging strategies. Investing in commodities markets may subject the Fund to greater volatility than investments in traditional securities. Currency trading risks include market risk, credit risk and country risk. Foreign investing involves risks not typically associated with U.S. investments. Changes in interest rates and the liquidity of certain investments could affect the Fund's overall performance. Other risks include U.S. Government securities risks and investments in fixed income securities. Typically, a rise in interest rates causes a decline in the value of fixed income securities or derivatives owned by the Fund. Furthermore, the use of leveraging can magnify the potential for gain or loss and amplify the effects of market volatility on the Fund's share price. The Fund is subject to regulatory change and tax risks; changes to current rules could increase costs associated with an investment in the Fund. These factors may affect the value of your investment.
Performance shown before December 28, 2015, is for the Fund's Predecessor Fund (Millburn Hedge Fund, L.P.). The Fund acquired all of the assets and liabilities of the Predecessor Fund in a tax-free reorganization on December 28, 2015 (the "Reorganization"). In connection with the Reorganization, shares of the Predecessor Fund were exchanged for Class I shares of the Fund. The prior performance is net of management fees and other expenses, including the effect of the performance fee. The Predecessor Fund was managed by the Sub-Advisor and had an investment objective and strategies that were, in all material respects, the same as those of the Fund, and was managed in a manner that, in all material respects, complied with the investment guidelines and restrictions of the Fund. From its inception through December 28, 2015, the Predecessor Fund was not subject to certain investment restrictions, diversification requirements and other restrictions of the Investment Company Act of 1940 Act, as amended, or the Internal Revenue Code, as amended, which, if they had been applicable, might have adversely affected its performance. In addition, the Predecessor Fund was not subject to sales loads that would have adversely affected performance. Performance of the Predecessor Fund is not an indicator of future results.
Glossary:
Bloomberg U.S. Aggregate Bond Total Return Index: A market capitalization-weighted Index that is designed to measure the performance of the US investment grade bond market with maturities of more than one year. Managed Futures: Professionally managed portfolios of futures, forwards and options contracts. S&P 500 TR Index: Used to represent the U.S. large-cap stock market as a whole.
| Share Class/Benchmark | YTD | 1 Year | 3 Years | 5 Years | 10 Years | Since Inception* |
|---|---|---|---|---|---|---|
| Class I | 9.92% | 16.79% | 10.61% | 8.68% | 8.42% | 10.34% |
| S&P 500 TR Index | −4.33% | 17.80% | 18.32% | 12.06% | 14.16% | 9.69% |
| ML 3 Month T-Bill Index | 0.86% | 4.03% | 4.77% | 3.36% | 2.27% | 2.33% |
| Class A | 9.82% | 16.47% | 10.32% | 8.41% | 8.15% | 8.69% |
| Class C | 9.62% | 15.61% | 9.50% | 7.59% | 7.34% | 7.87% |
| S&P 500 TR Index | −4.33% | 17.80% | 18.32% | 12.06% | 14.16% | 13.86% |
| ML 3 Month T-Bill Index | 0.86% | 4.03% | 4.77% | 3.36% | 2.27% | 2.22% |
| Class A w/Sales Charge | 3.50% | 9.77% | 8.17% | 7.13% | 7.51% | 8.06% |
* Class I Inception: 01/01/1997, Class A & C Inception: 12/28/2015
