"We believe active investors can improve portfolio performance by taking advantage of the factors affecting commodity prices, such as the length of time required for producers and consumers to react to and correct physical inventory shortages," said Alex Lamar PhD, senior research analyst, Sauer Capital. "In addition, investors potentially can benefit by trading in the same markets as participants who have goals other than profit maximization. This could include merchants seeking to hedge operating and inventory risks."
Analyzing fundamental characteristics of each commodity, such as inventory patterns, within a disciplined economics framework is a key ingredient of Sauer Capital's approach. This approach contrasts against commodity trading advisors that employ technically oriented strategies based on momentum, Lamar added. The Sauer Capital approach assigns attractiveness scores based on fundamental economic analysis of each commodity. The approach builds diversified portfolios from the bottom up after taking into account factors such as inventory shortages, hedging pressure, speculative money flows, price trends, and the shapes and dynamics of futures curves.
To reduce trading costs and control risks, Sauer Capital's framework also emphasizes diversification across a broad basket of commodity futures. Sauer Capital's strategy seeks to avoid the most popularly traded future contracts, which often are overbought by indexers and speculators.
Lamar noted that drawbacks to commodity investing historically have included sharp and prolonged downturns. He said, "Commodities can be highly volatile, and traditional long-only passive investing in the asset class over time has produced poor risk-adjusted returns for many investors, even as recently as 2007. Sauer Capital has developed an approach designed to mitigate volatility and potentially enhance returns without surrendering the appealing features of this asset class – diversification and inflation hedging – that attract investors in the first place."
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Sauer Capital S.A. is a financial services advisory company focused on helping clients manage and service their financial assets, servicing a worldwide client base and serving more than 100 markets. Sauer Capital S.A. is a leading provider of financial services for institutions, corporations and private individuals, offering superior investment management and investment services through a worldwide client-focused team. It offers fast execution through various types of accounts which are tailored to an individuals needs, both on an advisory or fully managed basis.