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Transcript of Alphafund
while keeping the risk at the minimal level Maximize our alpha returns
U.S. equity stocks
Expected excess return of 14.56% Keep risks at the minimum level
Diversification through regions
Ex-ante tracking error of no more than 16%
Commodity Commodities as an asset class consists of Oil, Natural gas, Aluminium, Copper, Rice, Gold, Silver ,Wheat, Corn, Cotton, Soya beans, etc.
Hedge against the other asset class
Good diversification in the portfolio
Investing in commodities is quite simple can be done through any of the following ways:
A) Investing in the Physical Commodities itself
B) Investing in the futures contracts for deliver in the future
C) Investing in the companies involved in the commodity business
We have chosen to invest in the companies involved in the commodity business:
Diversified nature of business
Stocks chosen : Energy
1) Cairn Energy.
2) Tullow Oil Plc.
3) British Petroleum.
Investment Rationale :
1) Exploration and Production of oil and gas.
2) High forward looking crude prices.
Stocks chosen: Industrial metals ,Precious Metals:
1) Vedanta resources .
2) BHP Billiton.
3) Rio Tinto .
Investment rationale :
1) Diversified nature of business like Iron ore, copper, Aluminum ,Gold etc .
2) Strong potential of upside in the prices of this commodities
Troubled Asset Relief Program (TARP) of $700 billion
Obama’s Recovery Plan of $825 billion
US Market US STOCK PICKING
1. Cyclical & Policy-driven
CRITERIA SECTOR Comparing to industry average We prefer higher ratio such as
Return on assets
Market Cap And the lower ratio such as
Performance Nearly 45% in commodity and financial stocks Commodity stocks 2.8%
Financial stocks 2.3% Overall Portfolio 1.9% Excess Return 1.9% 0.18%
Standard Deviation 0.76% 0.59%
Sharp Ratio 2.45 0.26
SECTOR Data Conditioning
Source of Datas Excess return
Autocorrelation Bootstrapping Black-Litterman Risk Aversion 7 Covariance Matrix General confidence in my views 80% View
Final Portfolio Excessive exposure to US dollar Optimization Solver Top - Down Sub-Portfolio of US Market
Sub-Portfolio of UK Commodities
ETFS: IWORD and EWJ Hedge with GBP/USD future contracts Alpha fund Benchmark Future of USA & New Path Strong, Flexiable & Progressive Oil Consumption of Century Clean Energy Based Economy Safety & Security Employment & New Prosperity
United State Non-Farm Payrolls
United States Exports Dow Jones-UBS Commodity Index Time of Changes& Painful Moments Time for Growth & Good Times Expected return Made by
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