Global Commodities Ltd

(Active Global Comm. Fund-USD)

Fund Investment Objectives

The GLOBAL COMMODITIES approach stores collateralized commodities on behalf of investors when profitable or moves cash during periods when storing commodities is costly. The strategy is not targeting market inefficiency; rather it capitalizes on how commodities are stored, transacted and valued. The approach seeks to benefit from the storage premium characteristic found at various times in commodities. To lock in a profit margin the commodity producer transfers price risk to another party, effectively hedging against price fluctuations. Through hedging the producer obtains insurance against any adverse price movements and therefore is prepared to pay an insurance or storage premium. The strategy determines when there is such an insurance premium and if it is high enough to justify taking the risk to store a commodity on a producer's behalf. By applying an option valuation technique, an implied yield and an implied cost can be derived. The implied yield is compared to the risk-free rate to determine when commodities are to be stored or sold. Investment capital is then allocated to the potentially higher yielding asset. As a function of this allocation process, it is possible for part, or all, of a commodity or commodity sector within the approach to be swapped to fixed interest during times of high storage costs, thus protecting the approach from excessive capital erosion. The investment strategy is applied utilizing a computer generated model.