Auspice Broad Commodity Excess Return Index (ABCERI)
Market Review
The ABCERI declined 1.57% in October largely due to a reversal in the Ag markets. Commodity remains a challenging sector generally experiencing lower trends and choppy activity.
Index Review
The ABCERI is down 4.17% YTD 2013. The index continues to outperform (see table below) most of the comparable indices on the year. The strategy holds 5 long components or 42% of the possible basket.
ABCERI now 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.
The following table highlights the strategy’s ability to capture the upside while limiting the downside.
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.
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.
Portfolio Recap:
In October, the ABCERI was flat 1 of 3 broad sectors.
Energy
Energy markets declined with long positions in Gasoline, Heating Oil and Crude Oil softening. There is no Natural Gas weight currently which was sharply lower.
Metals
The index remains without a long weight in Metals.
Agriculture
The Ag sector struggled in October as a couple of position changes and shifts in trend occurred. Sugar was shifted to a long weight early in the month as new quarterly highs were made early in the month. Conversely, Cotton was exited as the market continued to soften and prior to further weakening. The index has no weight in Wheat or Corn due to continued long term declining trends in these markets.
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.