Portfolio Construction

How to create a better long only commodity product

Introduction In a previous post we have tried to debunk long only commodity investing. The main arguments why it does not work over long time frames is because of the curve structure associated with commodities that have to be stored in warehouses or silos. Below we show the annualised return of long only positions consisting entirely of the commodity shown as a function of percentage of time spent in backwardation.

Polar Star Diversified Commodity Fund Baseline Weights

Introduction The aim of this post is to give the baseline portfolio weights of the Polar Star Diversified Commodity Fund. We employ the Black-Litterman methodology to tilt the allocations slighlty toward the underlying fund the greater return expectations and confidence. For more details on the process please see this link as well as other referenes therein. Baseline Weights To obtain baseline weights, we perform a risk-adjusted return portfolio optimisation with the returns stream of the three underlying funds

Polar Star as a component in a larger portfolio

Introduction This is a short write-up that uses Modern Portfolio Theory or Mean-Variance Analysis to give some guidelines on how the Polar Star Limited Fund can be used to create a portfolio with a better risk adjusted return compared to a basket of standard startegies. Throughout we will use four investible assets Cash - returns from libor rates Fixed Income - Bloomberg Barclays Global Aggregate Bond Index MSCI - Global USD Total Return Index Polar Star Ltd The challenge then becomes how to allocate capital between the different assets.

Polar Star View Portfolio Construction

1 Introduction 2 Baseline Weights 3 Effect of confidence on weights 4 Conclusion 1 Introduction In this document, we construct a framework within which we can construct the portfolio of the Polar Star Overlay fund. The overlay fund can invest in the Polar Star Limited, Polar Star Spectrum, and Polar Star Quantitative Commodity funds. We have a monthly return series for Polar Star Limited from July 2010.