The Threadneedle Enhanced Commodites Fund is a long only Ucits III portfolio that will be run by David Donora.
Donora will invest across the commodity range and at outset is expected to hold around 34% evenly split across both industrial and precious metals, 8.5% in softs, 32% in energy, 10% in grains, 7% in livestock and 3% in vegetable oils.
The Luxembourg-domiciled fund is a long only proposition, investing in swaps that provide the returns of single commodity indices. It will not use leverage and will not short. It will target a return of 6% out-performance of the DJ UBS Commodities Index, net of fees.
The fund will use the same resources as its commodity hedge fund that Donora is also the lead manager of.
Donora explains: “Commodities form an integral part of any well-diversified portfolio and as an asset class can provide capital growth, diversification, inflation protection and a hedge against currency devaluation. Global commodity markets are dynamic and, while commodities have traditionally been held as a passive investment, we believe that active management represents the next step in the evolution of this sector.”
He is not a fan of using futures contracts for commodity investing, arguing that this can lead to inefficiencies when the contracts are rolled before expiry. He prefers to take a more active approach and aims to generate outperformance by exploiting various market opportunities, such as macro/fundamental allocation, selective use of roll enhancements and optimising investment along the term structure.
