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Enhanced Commodities Strategy
Key facts*
| Investment objective | The strategy invests actively in commodities via derivatives on a global basis to achieve long-term capital growth in excess of the benchmark index |
| Co-portfolio managers | David Donora / Nicolas Robin |
| Benchmark | DJ UBS Commodities Index (TR) |
| Performance target | To outperform the benchmark by 3-6% per annum (net of fees) |
| Leverage | The strategy will not use leverage |
| Ability to short | The strategy will not use shorting |
| Credit exposure | Limited to 1-day mark-to-market |
| Collateral | Collateral will be held in government securities, eg T-Bills |
| Means of obtaining commodity exposure | We have exposure to a diversified range of commodities in the portfolio |
| Liquidity | The stategy aims to be fully invested at all times, with daily liquidity available to investors |
| Regulation | Portfolio invested within UCITS framework |
Philosophy
Commodity markets are individual and distinct with unique characteristics that constantly change and evolve over time. We therefore believe that trading or investing in commodities requires specialist skills and experience that can adapt to these changes. As such, our active investment approach is not constrained by the rigidity of passive strategies inherent in benchmark investing, and seeks to exploit the many opportunities that regularly exist in all commodity markets. As a result, we believe we can achieve sustained long-term outperformance through fundamentally driven active management, utilising all aspects of the markets.
Process
As a starting point for our active investment process, we take the individual markets and weights of the benchmark index. We then evaluate macro, fundamental and flow drivers to produce a scorecard that informs the allocations on an individual and sector basis, drawing on the wider Threadneedle investment platform as part of this analysis. The portfolio is then regularly rebalanced both in terms of its weightings, as well as the positioning along individual commodity term structures. Risk management is embedded within the process, with reports providing portfolio exposure and risk characteristics. Our independent Risk team monitors investment and non-investment risks.
*All data as at 31 December 2011. Where references are made to portfolio guidelines or features, these may be subject to change over time and prevailing market conditions. Actual investment parameters will be agreed and set out in the prospectus or formal investment management agreement. Please note that the performance target may not be attained.