According to Forward Management, the new fund is a pure commodity fund that uses an unbiased long/short strategy.
Forward’s new 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.
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.
The index 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. 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."
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.
Forward Management CEO Alan Reid said they believe that in this era of unpredictable returns, higher volatility, and higher asset class correlations, investor and advisors will need more nimble investment solutions to achieve the outcomes they are seeking.
"Forward is focused on providing fresh thinking and access to a wide range of portfolio building blocks, including creative approaches investors won’t find elsewhere," Reid said.
