Auspice Broad Commodity Excess Return Index (ABCERI)
Market Review
The ABCERI gained 0.56% in November largely due to the Energy sector. Commodities remain a challenging asset class experiencing both up and down trends and general choppy movement.
Index Review
While the ABCERI is off 3.64% YTD 2013, the index continues to perform strongly versus most of the comparable indices during the month and on the year (see Table 1 below).
Table 1: November 2013 and YTD Performance
ABCERI has over 3 years of live track record and continues to perform strongly during this difficult time for commodities. The index has produced better absolute returns and risk-adjusted returns than its peers while minimizing drawdowns. Table 2 also highlights the strategy’s ability to capture the upside while limiting the downside.
Table 2: 3 Year Annualized Performance
The ABCERI does not attempt to simply track the broad commodity markets or predict their direction, but rather aims to tactically capture upward price trends from those commodities that are making sustained moves higher while protecting capital on those that are making sustained moves lower.
Portfolio Recap:
In November, the ABCERI was up in 1 of 3 commodity sectors. The strategy currently holds 4 long components or 33% of the possible basket.
Energy
Energy was a positive contributor to the index gains. The petroleum side of the Energy market went in different directions with Gasoline and Heating Oil rallying where the index is long. However, Crude Oil was weak and the index exited it’s long position to be flat mid-month. The market continued lower and this preserved further capital erosion. There continues to be no weight in Natural Gas despite a rally during the month.
As outlined in an independent report by ETF Securities, the Auspice Broad Commodity Index remains one of the top performing global broad commodity indices. If you would like a copy of the most recent report, please contact Auspice.
Metals
The index remains without a long weight in Metals. This sector has been one of the most significant areas of commodity weakness in 2013, and the strategy has preserved capital during this period.
Agriculture
The Ag sector provided a small loss as the long gains made in Soybeans were offset by a pullback in Sugar. The index has no weight in Wheat, Corn or Cotton due to continued long term declining trends in these markets. Ags have experienced both up and down trends within the sector and within the Grain and Soft Commodity sub-sectors. The discipline and the agility of the strategy has successfully navigated this for a positive contribution year to date.
Outlook
While the past few years have been challenging for commodities, remaining tactically exposed has proven advantageous given the non-correlated diversification benefits. It is the continued goal of the ABCERI index strategy to minimize the downside with low volatility and drawdown and remain a store of value until upside opportunity presents itself. We believe that commodities provide important diversification for investors however proper risk management and downside protection must also play a key role in any investment decision.
Strategy and Index
The Auspice Broad Commodity Index aims to capture upward trends in the commodity markets while minimizing risk during downtrends. The index, which is considered to be a “third generation commodity index”, considers both risk and reward. The index uses a quantitative methodology to track either long or flat weights in a diversified portfolio of 12 commodity futures which cover the Energy, Metal, and Agricultural sectors.
Auspice Indices utilize dynamic risk management to produce superior risk adjusted performance in a variety of market environments. By dynamically managing the volatility of each commodity, Auspice ensures that no one commodity dominates the index thus maximizing the benefits of commodity diversification. Enhanced contract roll optimization further increases performance. On a risk adjusted basis, the Auspice Broad Commodity Total Return Index significantly outperforms its global peers. The Broad Commodity index is available in Total and Excess Return versions. The cash return for the total return index will be calculated daily using the 3-month CDOR (Canadian Dealer Offered Rate). The CDOR is the average rate for Canadian bankers' acceptances for specific terms-to-maturity (one year or less), determined daily from a survey on bid-side rates provided by the principal market-makers, including the major Canadian banks.
About the Index Provider
Auspice is an innovative asset manager that specializes in applying formalized investment strategies across a broad range of commodity and financial markets. Auspice’s portfolio managers are seasoned institutional commodity traders. Their experience, trading one of the most volatile asset classes, forms the backbone of their strategy for generating profits while preserving capital and dynamically managing risk.
Auspice Capital Advisors Ltd. is a registered Portfolio Manager / Investment Fund Manager / Exempt Market Dealer in Canada and a registered Commodity Trading Advisor (CTA) and National Futures Association (NFA) member in the US. Auspice’s core expertise is managing risk and designing and executing systematic trading strategies.
Auspice uses its diverse trading and risk management experience to manage 4 diverse product lines and has been described as a “next generation CTA”, offering strategies in active managed futures (CTA), passive ETFs, enhanced indices and custom commodity strategies. Futures trading is speculative and is not suitable for all customers.