Schroders' commodities strategy aims to outperform the simple average of the four major commodities indices (S&P GSCI TR, TR/J CRB, BCOM TR, RICI TR) with a lower level of volatility.
Schroders began managing commodities in October 2005. The strategy is managed by a dedicated team based in London and supported by the global resources of the entire Schroders group. The investment opportunity set includes more than 60 commodities and the strategy invests in both commodity futures, commodity swaps and commodity-related equities. Rigorous risk controls place strict limits on the maximum exposure to any single commodity as well as to sector, instrument and cash. Cash/collateral positions are solely invested in US Treasury Bills with less than 12 months maturity.
The Schroders commodity strategy is managed by a dedicated team based in London. Geoff Blanning, Head of Commodities and EMD, is the lead portfolio manager for the commodities strategy and responsible for analyzing the energy sector. James Luke, a metals researcher, analyzes the metals sector. Rodolphe Roche, an agricultural economist, analyzes the agricultural sector. John Coyle and Mark Lacey undertake commodity equity analysis and act as an interface between the commodities team and the relevant Schroders equity analysts. They are supported by the global resources of the Schroders group including the economics team, and the commodities-related equity and fixed income analysts.
Geoff Blanning is Head of EMD, Currencies and Commodities at Schroders. He joined in 1998 and has developed Schroders' EMD and commodities business. Geoff has responsibility for investment performance and business strategy. Prior to Schroders, Geoff managed Global Bond funds at N.M. Rothschild & Bankers Trust.
Rodolphe Roche is the Head of Commodity Research and Agriculture Portfolio Manager based in London. Rodolphe joined Schroders in early 2005 as a Fund Manager / Agriculture Analyst and worked on the design and structure of the Schroder AS Agriculture Fund. He was appointed Portfolio Manager when the fund was launched in October 2006.
James Luke is a Metals Portfolio Manager based in London. He joined Schroders in August 2014 as a Metals Portfolio Manager. Previously, James was Co-Head of Metals Research at J.P. Morgan and a Metals Research Analyst at China International Capital Corporation in Hong Kong and at Sanford C. Bernstein and UBS in London. His investment career commenced in 2005 at Williams de Broë.
Mark Lacey is a Global Energy Co-Portfolio Manager. He joined Schroders in 2013 and is based in London. Mark joined Schroders from Mercuria Global Energy Solutions, a commodities trader for which he was hired to set up a global asset management business. Prior to this, Mark was responsible for managing Investec’s highly-rated global energy portfolios from 2008.
John Coyle is a Portfolio Manager and Advisor to the Global and International Equities team. He joined Schroders in 2003 and is based in London. In addition to his portfolio management responsibilities, John also provides primary research input on the energy sector to Schroders’ UK and US equity teams, as well as advisory work for the European equities team.
We believe that over a market cycle, an actively-managed commodities portfolio will produce higher returns at a lower level of volatility than a passively managed portfolio.
The investment approach emphasizes active management within an index unconstrained opportunity set. The strategy is long only and does not employ leverage. Fundamental analysis drives the investment process with quantitative, technical and sentiment analyses playing key supporting roles. Equal emphasis is placed on each of the three key commodity sectors: agriculture, energy and metals. Investments are made on a medium-term time horizon.
The investment process makes a distinction between Market Analysis, which encompasses the identification of trends and resulting opportunities, and Portfolio Construction.
Global conditions for commodities are discussed monthly. A broad investment framework covering major themes in the market is then created encompassing global and sector outlooks (agriculture, metals, energy) and long-term chart analysis (technical analysis).
Commodity Analysis forms the core of our investment process. Major commodities are reviewed one to two times a year. The investment team meets on a weekly basis to review the global commodity markets. Any potential changes to strategy and allocation are discussed at these meetings. Individual commodity analysis is discussed in depth at these meetings using fundamental, quantitative, technical and sentiment analysis.
Fundamental Analysis involves the relevant analyst producing a detailed report on the commodity under discussion. This includes a review of supply and demand factors and a full statistical analysis of supply/demand balances. The report sets out 3- and 12- month price forecasts for the commodity together with an anticipated 12 month price range.
Quantitative Analysis involves the production, where relevant, of multi-linear models for each commodity. Each model contains 3-10 key factors specific to each commodity and is constructed using 30-50 years of historical data. Ongoing back-testing for both full- and sub-periods seeks to ensure the validity of the models.
Technical Analysis examines chart analysis for each commodity. Daily, weekly and monthly charts are produced using the following technical tools: Bollinger Bands, stochastic, Mac-D, PTPS, moving averages and trend lines.
Sentiment Analysis covers market positioning. We use a wide range of data including the net non-commercial positions in each traded commodity and ETF holdings and flows.
Portfolio Construction: While benchmark unconstrained, the strategy employs strict diversification rules. A position in a commodity is only initiated when analysis indicates an attractive risk/reward opportunity. Averaging down is avoided while the strategy will aggressively average up as price action confirms analysis. Profit targets are set which trigger sales when reached. Up to one third of the portfolio can be held in cash to control downside volatility. Cash positions are actively managed and are invested solely in Treasury Bills with less than 12-month maturity.
- Index-unconstrained opportunities with active management
- Long-only strategy; does not use leverage
- Equal emphasis placed on each of the three key commodity sectors: agriculture, energy and metals
- Separate Accounts
- Commingled Vehicle