Designed to provide broad, commodities exposure, participate in global growth trends and hedge against inflation using a risk-managed approach
- Diversified, futures-based portfolio of 27 commodities across six sectors
- Dynamic core allocations combined with tactical views that are actively managed on an ongoing basis
- Managed by an experienced team with a focus on risk
- Commodities represent a unique asset class with risk/return characteristics offering strategic diversification benefits not available from other asset classes.
- Passive commodity investing is not well-defined: Exposures based on production and/or trading volume, as is the case across major commodity indices, can lead to unintended sector and risk concentrations.
- Commodities investing requires an actively managed approach, as the markets are influenced by a wide range of themes including macroeconomic and commodity-specific factors.
We select commodity investments through a two-step process that seeks to balance risks while providing an alternative and more diverse source of return than traditional asset classes.
Dynamic Core Strategy
- Select weights by considering:
- Roll Yield
- Seek to balance the portfolio across these factors and limit the impact of any individual commodity on total portfolio risk
- Seek to enhance return potential by over and underweighting core exposures, following an evaluation of each commodity across three major themes:
- Pairwise relationships
- Final portfolio constructed by combining Core and Tactical exposures
- Contract selection is a key consideration and a potential source of additional return
- Portfolio is monitored daily and rebalanced monthly
- Risk management by portfolio team and independent risk team
Tactical Tilts Used Opportunistically in an Effort to Add Alpha
We believe alpha can be generated by taking advantage of short- to medium-term market inefficiencies affecting commodities prices, ranging from macroeconomic conditions to commodity-specific fundamentals and relationships.