Algorithmic trading for commodities
According to a report in the FT, UBS is planning to launch a new automated trading fund for commodities.
“The UBS Commodities Portfolio Algorithmic Strategy System aims to fill a gap in the market between the long-only passive indices, such as the popular S&P GSCI – which has about $70bn tracking it – and services provided by commodities trading advisers and hedge funds.
Peter Ghavami, UBS head of commodities, said: “As familiarity with the commodities asset class grows, an increasing number of investors are recognizing the value of taking a more active approach.”
The UBS Comm-PASS consists of a basket of strategies on 19 commodities future markets, with a 51 per cent exposure to energy.
The system, according to the bank, picks up on the momentum in the commodity markets and exploits it through automated long and short strategies.
. . .
Traditional commodities vehicles bet only on higher prices and usually roll over their positions every month, selling the front-month contract and buying the following contract.
The strategy results in losses when prices fall from one month to the next or during a bear market.
Sharp losses that resulted from this type of investment in late 2005 and in 2006 have prompted some institutional investors to consider more complex commodity investment strategies.”