Systematic Commodity Alpha

Portfolio diversification with alternative risk premia from commodities

Whether stocks are tight or markets are oversupplied, short and long positions can generate positive returns with moderate volatility in both phases. Tank farm in Helsinki. H. MARTK WEIDMAN PHOTOGRAPHY ALAMY

Alternative risk premia can be used to diversify portfolios at low cost and with a high level of transparency. When long-short strategies are used, the trend dynamics of the commodity markets mean that they offer attractive opportunities for long-term positive returns with moderate volatility, during both upturns and downturns. In Systematic Commodity Alpha, Picard Angst is offering a cost-effective version of this investment strategy that has enjoyed success for many years.

Traditionally, commodities have been included in portfolios to hedge against inflation. Their returns follow a cyclical profile and are well-suited to providing diversification due to their low correlation with traditional investment categories such as shares and bonds. The general risk premium can be realised by the use of beta strategies with broad diversification.

Furthermore, the rich structure of the commodity markets opens up opportunities to profit from additional alternative risk premia. These risk premia compensate investors for purchasing specific risk factors that arise from the cyclic nature of the pricing dynamics, maturity structures or volatility of the commodity markets.

Benefits of alternative risk premia

A transparent, quantitative investment strategy enables various sources of returns to be combined with one another, creating a risk-return profile that is advantageous in the medium-term and long-term. Other benefits include:


Steady, positive returns (absolute return)


Moderate volatility, modest drawdowns


Low correlation with other investment categories


Independence from market developments


Sources of returns on the commodity markets

Systematic Commodity Alpha sees Picard Angst consistently exploit momentum and curve values as sources of returns. The global trade cycle creates discrepancies between supply and demand on a constant basis, which are in turn utilised so that profit can be drawn from momentum effects in both market directions.

Supply conditions also play a key role: low stock levels and scarce availability (backwardation) go hand-in-hand with increasing prices and positive roll returns, while oversupplied markets (contango) see prices and roll returns shrink. This connection is also exploited to enable short and long positions alike to be profitable in both directions.

Positive returns independent of the commodity cycle

The Picard Angst Systematic Commodity Alpha alternative risk premia strategy enables positive returns to be achieved in the medium-term to long-term, independent of the commodity cycle. 31 December 1999 to 29 March 2019. Source: PICARD ANGST / BLOOMBERG

Significantly higher risk-adjusted returns

The alternative risk premia strategy offered by Picard Angst Systematic Commodity Alpha offers significantly higher returns with less volatility, when compared to beta strategies. 31 December 1999 to 29 March 2019. Source: PICARD ANGST / BLOOMBERG

Efficiently diversify any portfolio

The strategy consistently behaves independently of traditional asset classes like shares and bonds. Paired with an attractive profit/risk profile, this makes it well-suited for use as a component to diversify and optimise returns in an aggregate portfolio.

Its low correlation (even with widely diversified commodity beta strategies) and significantly higher risk-adjusted returns make an alternative risk premia strategy an attractive addition to a core beta commodity portfolio.

Global 60/40 portfolio

  Weight Return p.a. Volatility p.a.
Equities (MSCI) 60.00% 4.53% 15.02%
Global Bonds 40.00% 4.78% 5.57%
Portfolio 100.00% 4.63% 9.75%
Portfolio Sharpe Ratio 0.47

Adding 5% Commodity Alpha

  Weight Return p.a. Volatility p.a.
Equities (MSCI) 55.00% 4.53% 15.02%
Global Bonds 40.00% 4.78% 5.57%
Commodity -Alpha 5.00% 11.45% 10.04%
Portfolio 100.00% 4.97% 9.04%
Portfolio Sharpe Ratio 0.55

Adding 10% Commodity Alpha

  Weight Return p.a. Volatility p.a.
Equities (MSCI) 55.00% 4.53% 15.02%
Global Bonds 40.00% 4.78% 5.57%
Commodity-Alpha 10.00% 11.45% 10.04%
Portfolio 100.00% 5.32% 8.37%
Portfolio Sharpe Ratio 0.64

31 December 1999 to 29 March 2019. Shares are represented by the MSCI World DM Net TR Index, bonds by the JP Morgan Global Aggregate Bond TR Index, and commodity alphas by the Picard Angst Systematic Commodity Alpha Strategy. Source: PICARD ANGST, BLOOMBERG


Picard Angst Systematic Commodity Alpha Funds

Picard Angst Systematic Commodity Alpha Funds offer an alternative risk premia strategy in the form of a fund subject to Swiss law. They are available to both institutional investors and retail investors. The funds follow this investment strategy in a cost-effective manner by using exchange-traded futures contracts, thereby avoiding the overhead costs and counterparty risks that would be incurred with OTC derivatives (swaps). We pursue a conservative collateral management strategy, limited to money market investments of the highest levels of creditworthiness (AAA rating) and liquidity, such as US Treasury bills.

Factsheet Systematic Commodity Alpha – Institutional USD (ISIN CH0276703870)
Factsheet Systematic Commodity Alpha – Institutional CHF hedged (ISIN CH0276703896)