The new mutual fund seeks to profit from both up and down movements of commodity prices. It is offered in investor and institutional share classes and is available through Charles Schwab, LPL Financial, Matrix Clearing, National Financial, and Pershing.
The fund uses the Credit Suisse Momentum and Volatility Enhanced Return Strategy (CS MOVERS) Index, an index that seeks to capitalize on the price momentum of major commodity futures, according to the company. The fund uses a total return swap to gain exposure to the CS MOVERS Index.
The CS MOVERS Index uses a tactical approach to seek
positive absolute returns at bullish and bearish points in the commodity
cycle for each of the 24 single commodities, or sub-indexes, in the
S&P GSCI Index. It employs a systematic process that uses
volatility-adjusted momentum to invest long or short in commodities that
rank highest in positive or negative returns over previous months,
subject to diversification rules, the announcement said. Rankings are
recalculated and the portfolio is rebalanced monthly.
Forward has worked with Credit Suisse to enhance the index with a strategy component seeking to increase total return by adding positive “roll yield.” Roll yield is the difference in the price of futures contracts as the nearby contract approaches expire and the position must be rolled to the next contract.
The fund pursues positive roll yield by allocating long positions to nearby, first deferred or second deferred futures contracts based on seasonally and risk-adjusted performance. Based on portfolio modeling, the enhanced strategy increased annualized total return of the CS MOVERS Index from 18.7% to 20.6% over the 1998-2010 period.