In the summer of 2010 we were looking for a way for our company to hedge its risk against steel price fluctuations. My company commits to a fixed price for steel supply and install for construction projects across Western Canada. Our risk from steel price fluctuations is substantial, especially on very large multi-year projects. Auspice was able to give us the direction and advice we needed to create a hedging tool that allows us to, for the first time, remove considerable market place risk from our equation. Tim Pickering and Ken Corner impressed me throughout the process with their ability to think practically and creatively about hedging strategies that worked for my business.
Commodities are well recognized for their diversification potential for a traditional basket of stocks and bonds (both from the point of view of exhibiting low correlation and as an excellent inflation hedge). Investors in passive, long-only commodities (beta products) have historically had to pay a high price for this diversification, however, in the form of large drawdowns, high volatility, and resulting low risk-adjusted returns. The advent of alpha-driven products, that maintain the diversification benefits of beta-driven products while significantly limiting their ancillary detriments, has resulted in a `best of both worlds scenario in which investors are able to achieve both higher returns and lower risk simultaneously, often referred to as moving the efficient frontier `up and to the left`.As a pioneer* in the realm of actively managed commodity-based products, Tim Pickering and Auspice Capital constantly strive to extract the most value out of beta-driven products while providing enhanced return and downside protection through the addition of alpha-driven strategies.
*In reference to beta and enhanced beta index products