shanghaicommodities

shanghaicommodities - Asset Allocation Strategies for...

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Unformatted text preview: Asset Allocation Strategies for Commodities by Asset Allocation Parametrics, LLC 1 Asset Allocation Strategies for Commodities Investments Commodities Trading & Investment Conference September 24, 2008, Shanghai Albert J. Brenner, CFA Executive Managing Director Asset Allocation Parametrics, LLC www.aametrics.com 1007 Farmington Avenue, Suite 18B West Hartford, CT, 06107 USA Contents I. Introduction II. Overcoming objections to investing in commodities III. Investing in a total return commodities index IV. Index return characteristics V. Asset allocation and portfolio optimization with commodities VI. Final thoughts Asset Allocation Strategies for Commodities by Asset Allocation Parametrics, LLC 3 I. Introduction Greetings Some words on perspectives and data Credits See Fact and Fantasies about Commodity Futures by Gary Gorton and K. Geert Rouwenhorst in the Financial Analysts Journal, March/April 2007 . Caveats Nothing in this presentation is intended as a solicitation to purchase or sell any security, investment, or commodity. Past performance is not necessarily an indicator of future performance. Portfolio planning must take into account investor risk, liability, tax, and currency conversion considerations. Asset Allocation Strategies for Commodities by Asset Allocation Parametrics, LLC 4 II. Overcoming Objections Investor reluctance to invest in commodities is often based on one or more objections: 1. Commodities are not real financial assets 2. Commodities are too risky 3. Investment portfolio policy leaves no room for commodities Asset Allocation Strategies for Commodities by Asset Allocation Parametrics, LLC 5 II. Overcoming Objections Objection 1 Commodities are not real financial assets. Investing in them is just betting on price movements. Asset Allocation Strategies for Commodities by Asset Allocation Parametrics, LLC 6 II. Overcoming Objections Reply to Objection 1 Commodities are not traditional financial assets that derive returns from the use of capital in a productive enterprise as do investments in stocks, bonds, or real estate. Some commodity investment strategies do rely on betting on price changes to generate returns. Asset Allocation Strategies for Commodities by Asset Allocation Parametrics, LLC 7 II. Overcoming Objections Reply to Objection 1 BUT, commodities investment vehicles exist that are not fundamentally speculative and do provide returns that are not dependent on price appreciation or depreciation (details to come) Asset Allocation Strategies for Commodities by Asset Allocation Parametrics, LLC 8 II. Overcoming Objections Objection 2 Commodities are too risky. Asset Allocation Strategies for Commodities by Asset Allocation Parametrics, LLC 9 II. Overcoming Objections Reply to Objection 2 On a US$ return basis commodities are riskier than both large-cap and small-cap stocks but comparable to small-cap stocks....
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shanghaicommodities - Asset Allocation Strategies for...

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