Thu, 19/11/2009 - 06:02
Salus Alpha has launched a commodity arbitrage fund which aims to take advantage of the difference between the S&P GSCI Total Return index and the S&P GSCI Spot Index.
As of 13 November 2009, the Total Return Index had a year-to-date performance of 10.16 per cent, while the Spot Index had a performance of 43.78 per cent – a difference of nearly 34 per cent.
According to Salus Alpha, investors hoping for 43 per cent but only earning ten per cent would have had a chance on a 34 per cent return with an investment in the Salus Alpha Commodity Arbitrage.
The investment approach of the fund enables investors to obtain returns from both Backwardation (the expiring futures contract is more expensive as the next delivery month) and Contango. The strategy commodity arbitrage tries to profit from price differences on various commodity markets or between related commodities.
The fund also employs seasonal strategies. Seasonality signifies price inefficiencies arising where a commodity experiences increased demand for production purposes at certain times of the year, and decreased demand at other times. Energy products, for example, experience higher demand in winter (for heating) and in summer (for cooling) than in spring and autumn. These imbalances produce arbitrage opportunities that the fund tries to exploit.
Salus Alpha Commodity Arbitrage invests indirectly into commodities via index derivatives such as swaps and futures. The fund’s portfolio consists of financial indices such as the CAX - Commodity Arbitrage Index listed on the Vienna stock exchange. The index was launched by Alternative-Index, a member of the Salus Alpha Group.
The subscription period for the Salus Alpha Commodity Arbitrage is from 17 to 30 November 2009.
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