Parametric Commodity A Third Way of Commodity Investing“There’s an alternative. There’s always a third way, and it’s not a combination of the other two ways. It’s a different way.”
Commodity markets—which only 20 years ago were considered to be the realm of only the reckless or the most courageous—are rapidly becoming a meaningful part of many investors’ portfolios. However, investors have learned that they are put in a ‘rock-and-a-hard-place’ situation, with active strategies openly being counter to their strategic motivations for investing in commodities, while passive solutions create poorly constructed portfolios which are vulnerable to front running. We believe that the commodity strategy outlined in this paper can efficiently and consistently capture the diversification and inflation-fighting goals of this asset class, without incurring the return risks inherent in active management or the concentration risks of the mainstream commodity indexes.