According to the announcement, the strategy is designed to provide investors with exposure to the commodity markets “while taking advantage of multiple return sources not captured in the common commodity indices”. Using a benchmark agnostic approach that Invesco says capitalizes on both structural and tactical sources of return, the strategy seeks to outperform the common commodity indices over time with improved volatility and drawdown characteristics. The strategy’s goal is to use proprietary risk management and re-balancing techniques to generate returns with a higher Sharpe Ratio over time than what is available from the common commodity indices, according to the firm.
“Commodities are unique in many ways when compared to more familiar asset classes like equities or fixed income,” said Scott Wolle, Chief Investment Officer of Invesco Global Asset Allocation. “Investing in commodities provides investors with several return opportunities not present in other asset classes that can have a material impact on results. By taking a benchmark agnostic approach to the asset class, we are able to capture these return opportunities in a mandate that is very competitively priced and that has high transparency.”
The Balanced-Risk Commodity strategy targets an excess return of 5% per annum vs. the Dow Jones – UBS Commodity Index over a 3 to 5 year investment horizon, according to the firm, which says that the Global Asset Allocation team has successfully applied the same principles since September 30, 2008 in the commodity portion of its risk-parity strategy, Premia Plus.