Financial Charts

Commodity

Our Commodity strategy seeks to avoid the concentrations that occur in mainstream commodity indexes by investing broadly across commodity types and rebalancing to capture a premium. 

Strategy Goals

Parametric’s Systematic Alpha strategies are broadly diversified and dynamically rebalanced portfolios designed to outperform capitalization-weighted approaches over the long term with less risk. Diversification is established via a system of portfolio target weights. As market forces move the portfolio’s holdings away from the target weights, diversification is re-established via a trigger-based rebalancing process. Our active reweighting and rebalancing have the potential to generate excess returns.  Parametric’s experience constructing and managing portfolios for over 25 years has informed and enhanced the development of our Systematic Alpha strategies.  

The Parametric Commodity strategy seeks to add value through disciplined portfolio construction and rebalancing among individual commodities, while maintaining the diversifying and inflation-fighting characteristics which make the commodity asset class so appealing.  By capitalizing on commodity-specific volatility and the low level of cross-correlation prevalent in commodity markets, the strategy seeks to allow long-term exposure to the commodity asset class with more consistent returns than the Bloomberg Commodity Index Total Return.

Investment Philosophy

We utilize an engineered and disciplined approach to exploit the unique characteristics of the commodity asset class.

 

Reweight

 

  • Increase diversification by reweighting
  • Split into tiers by liquidity; equally weight all contracts in each tier
  • Scale upstream and similar commodities down a tier

 

Rebalance

 

  • Rebalance to target weights monthly as contracts are rolled
  • Rebalance to target when portfolio weights fall below 80%, or exceed 120%, of target weight

 

Collateral

 

  • U.S. Treasury bills, 3-12 month maturity
  • Avoids risky investments

This Commodity strategy is offered by Parametric Investment & Overlay Strategies.  For additional information please visit the Disclosure page.

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