Macquarie launches wholesale commodities fund

28 May 2006


Macquarie Funds Management announces the launch of the Macquarie Commodities Fund providing investors with direct access to the performance of commodity markets.

The Macquarie Commodities Fund is a wholesale fund providing investors with tailored access to the diversification and return potential of commodity indices.

Macquarie Funds Management Head of Distribution, Bruce Murphy, said: “The Macquarie Commodities Fund is an actively managed fund which provides investors with liquid, low cost access to a broad and diversified portfolio of commodities including energy markets, industrial and precious metals, agricultural products and livestock.”

Mr Murphy said “Super funds and asset consultants have been looking closely at the benefits of including commodities in their clients’ portfolios for some time, whilst performance of commodity markets demonstrates the potential returns from commodity investment”.

“While commodities are considered to have higher risk on a stand-alone basis, their low or negative correlation to traditional asset classes means that even a small allocation to them may significantly reduce portfolio volatility,” he said.

He noted that at an international institutional investor conference in Europe earlier this year 93 per cent of the audience expected to increase their commodities exposure during the next three years, but only 11 per cent of the audience said they would choose a passive long-only index fund as their preferred approach. Seventy per cent chose a combination of structured and actively managed exposures such as will be offered in the Macquarie Commodities Fund.

Macquarie Funds Management Division Director, Louise Walker, said the Fund has been established by Macquarie Funds Management (MFM) in conjunction with Treasury and Commodities Group (TCG), an operating division of Macquarie Bank. “Investors will benefit from the combination of MFM’s extensive experience in portfolio and risk management as well as TCG’s strong knowledge and direct market participation across a broad range of commodities.”

MFM currently manages more than A$50 billion across both traditional and alternative asset classes. TCG is a leading international provider of price risk management and structured finance solutions for commodity producers, consumers, trade participants and investors with a client base that spans the globe. TCG has been an active participant in the global commodity markets for over 20 years.

“Given TCG’s trading expertise in commodities, we expect the Fund to be differentiated from other funds in the marketplace with a much more active approach,” Ms Walker said.

“Our approach adds value through multiple non-directional commodity trading strategies, which are developed by TCG and systematically tested by MFM. This back-testing provides information on the risk/reward trade-offs of each strategy across every commodity in the major indices. MFM then use this information to set the maximum risk limits for each strategy and commodity. The discretionary aspect comes into play in terms of determining when the strategies will be included in the portfolio, on which commodities and how much risk is allocated to each strategy,” explained Ms Walker.

“The types of alpha trading strategies we will be including will vary over time to ensure a diversification of risk and also to reflect changing market conditions. For example, we will be using non-directional strategies which take advantage of the shape of the price curve for a single commodity, reflect the opportunities from seasonal effects and spread trades across related commodities such as brent crude and WTI,” said Sebastian Barrack, Executive Director Treasury and Commodities Group.

“We are backing our ability to add significant value by having a lower management fee than most competitors combined with a performance fee,” said Ms Walker.

“We will be separating the index replication process from the alpha trading strategies, enabling us to offer a range of classes which will be designed to meet different investors’ needs. The classes will vary by commodity index, level of exposure to alpha strategies, currency denomination and amount (if any) of currency hedging,” said Ms Walker.

“Commodity indices vary significantly in terms of structure – for instance some have a very high weighting to the energy sector, others limit this exposure. Some investors are keen to have a higher exposure to the energy sector, others prefer a more diversified index,” said Mr Barrack.

Mr Barrack added: “Commodity index investment has experienced significant growth in recent years corresponding to the strong performance of the underlying markets.”

Macquarie has been an active participant in structuring and trading index related products with a variety of professional investors in recent years.

“The value Macquarie’s Treasury and Commodities team brings to the Fund is the experience and insight gained by direct participation in over 20 different commodity markets on a daily basis and applying this insight to position the Fund to drive outperformance,” he said.

Ms Walker noted that initial classes on offer are an Australian dollar hedged class with the DJ-AIG Total Return Commodities IndexSM as its benchmark and a USD denominated class which has the GSCIâ Total Return Commodities Index as its benchmark.

For further information, please contact:

Irene O'Brien
Head of PR & Communication
Macquarie Financial Services Group
Macquarie Funds Management Group
Tel: (612) 8232 3241
Mobile: (61) 417 260 309

Bruce Murphy
Head of Distribution
Macquarie Funds Management Group
Macquarie Funds Management Group
Tel: (612) 8232 7008


Important notes

This release is issued by Macquarie Investment Management Limited, ABN 66 002 867 003 AFSL 237 492 (MIML, Macquarie Funds Management), Manager of the Macquarie Commodities Fund Limited. The Fund is only available to professional and other qualified investors. This information is not personal advice and does not take into account the investment objectives, financial situation or needs of any person. Before making any investment decision, investors should consider the appropriateness of the information based on their own circumstances or consult a professional adviser.

MIML is not an authorised deposit-taking institution for the purposes of the Banking Act (Cth) 1959, and MIML’s obligations do not represent deposits or other liabilities of Macquarie Bank Limited ABN 46 008 583 542. Macquarie Bank Limited does not guarantee or otherwise provide assurance in respect of the obligations of MIML.

Past performance information is not indicative of future performance. It should not be relied upon in deciding whether to invest in the Fund.

This announcement has been prepared for publication in Australia and may not be released in the United States. This announcement does not constitute an offer of securities for sale in the United States and any securities described in this announcement may not be offered or sold in the United States absent registration under the US Securities Act of 1933 or an exemption from registration.

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