Bringing Opportunistic Commodity-focused exposure to Institutional Investors
At IDX we are focused on developing Risk-Managed Solutions that make it simple for fiduciaries and investors to participate in commodities beyond what’s available through traditional managed futures or long-only commodities funds.
IDX combines expertise across the managed futures and ETF landscape to deliver institutional investors risk-managed exposure that is focused on commodities with an ability to go short as well as opportunistically participate across asset classes.
The IDX Adaptive Opportunities Fund (COIDX) seeks to tactically allocate to futures and ETFs, using a rules-based approach, in an effort to capture trends across asset classes (with a focus on commodities).
The IDX Adaptive Opportunities Fund (COIDX) seeks to deliver a superior risk/return profile relative to long-only (passive) commodity exposure.
Unlike managed futures funds, the IDX Adaptive Opportunities Fund (COIDX) can utilize ETFs to participate capture trends across a broader ecosystem of exposure (i.e. Miners, Oil Services) as well as entire industries not captured by the futures markets (i.e. CleanTech, AgTech)
Most investors think of Commodities as a single long-only allocation to a fund. In most cases, commodities funds are weighted by open interest and therefore heavily skewed towards a long energy exposure.
The reality, however, is that the commodities markets are very different and reflect nuanced and, often opposing, outlooks. Precious metals, for example, may respond strongly to geo-political risks and interest rate movements, while Grains are moving in a completely opposite direction based on drought forecasts.
We believe that investors that are serious about commodities exposures in their portfolios should consider a long/short approach. The global commodities markets represent a diverse and multi-faceted ecosystem that have different drivers of returns that can move very differently based on market conditions. We believe investors’ approach should reflect this reality.
Commodities have long been an important source of return within institutional portfolios. Over the last decade, generationally low interest rates and inflation combined with quantitative easing have caused investors to chase increasingly speculative or growth-oriented investments. The issue remains that commodities have always been a volatile asset class. IDX seeks to harvest that volatility as a source of return for investors by tactically establishing both long and short exposures that seek to take advantage of trends across all environments.
We began managing commodities exposure in the form of Separately Managed Accounts in 2019 with a dedicated focus on Risk-Mitigation. Commodities are a powerful asset class for investors, particularly during periods of non-zero inflation and increased geo-political risks. That said, the volatility and large drawdowns of the asset class are a stumbling block for many investors. By taking an opportunistic long/short approach to commodities, IDX seeks to provide investors with a commodity-focused exposure that can make money in any environment.
Futures contracts have largely remained unchanged since the 70’s while all of the innovation in providing exposures has been in the ETF landscape. By moving outside just futures contracts, the IDX Adaptive Opportunities Fund can participate in trends within the commodities ecosystem that extend beyond just the raw material (such as Oil Services or Miners) as well as entirely new parts of the ecosystem that have no futures representation at all (such as “CleanTech” or “AgriBusiness”).
