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KomBench Sigma

KomBench SIGMA is a portfolio management product from KomBench wherein the pool of funds is invested in commodity / currency futures instruments traded on Dubai Gold and Commodities Exchange (DGCX).

The Greek Letter SIGMA signifies ‘deviation’. KomBench SIGMA invests in commodities asset class which is classified as ‘alternative investment’ and so much different from the traditional equity, fixed income and real estate investments.

COMMODITIES AS ASSET CLASS

Commodities, though being one of the oldest asset classes shot into fame during the last few years when the professional portfolio managers and hedge fund managers searched for investments with high returns potential. With the world economies expanding rapidly and demand for commodities sky-rocketing, the entire asset class has been seeing a healthy long-term bull trend which has so far made commodities outshine other asset classes.

Commodities in recent years have seen steady inflow of investments and seem to be well-set to ride the wave in
the foreseeable future. Following table shows the annualized returns realized from commodities compared with other popular asset classes. Commodities have out-performed other forms of investments including Hedge funds during the last 5 years.

Asset Class Index Last 5 years Last 10 years
 
Commodities
GSCI TR
14.80%
9.40%
Equities
S&P 500 composite
5.00%
9.80%
Fixed income
JPM Govt Bond Index TR
4.80%
6.20%
Hedge Funds
CSFB/Tremont Hedge Fund Index
8.60%
11.00%
Emerging market Bonds JPM Emerging Markets Bond Index TR 12.10% 11.70%

Commodities cycles last longer than equities and so may have many more years of bull-run to come. Famous commodities bulls such as Mark Faber and Jim Rogers believe that commodities bull-run has just begun.

CURRENCY MARKETS

Currency markets are the most liquid of all financial markets in the world with the daily trading volume exceeding $2 trillion. Currency derivatives markets combine the advantages of leveraged trading and low costs to provide an efficient medium of benefiting from the movements in currency pairs.

Following chart shows the volumes in currency spot markets:

Year 1989 1992 1995 1998 2001 2004
Average Daily Turnover ($mn) 600 820 1200
1500 1200 1900

SIGMA – PRODUCT DETAILS

Investment philosophy: To generate above-average returns by investing in derivatives traded on DGCX and by optimizing leverage and holding period.

Scope of Investments: Managed futures product shall invest the proceeds in leveraged futures on Commodities and currencies listed and traded on the Dubai Gold and Commodities Exchange (DGCX).

Investment Strategy: KomBench Managed futures product tries to strike a balance between the short-term tactical trading and long-term strategic investments to generate above-average returns from the market.

RISKS INVOLVED

Market Risk: Managed futures investments are subject to market risk both specific to the commodity/currency and generic to a group of commodities/currencies

Leverage Risk: Managed futures product invests in leveraged instruments which magnify the risks and returns.

RISK OPTIMIZATION

KomBench Managed future tries to optimize the risks by determining appropriate leverage levels to be maintained from time to time. A combination of fundamental and technical research is used to determine the choice of investments and timing.

BENEFITS

Portfolio Diversification:
Managed futures invest in futures instruments on various commodities like Gold, Silver, cotton, fuel oil and also currencies such as Euro, Pound, Yen. Therefore there is an inherent portfolio diversification built into the product

Professional Portfolio Management::
The managed futures accounts are managed by a professional advisor well qualified and experienced in trading these markets supported by a team of analysts and researchers who hold specialization in various techniques of research and price-forecasting. The execution of trades is carried out by specialist traders.

Alternative Investments:
KomBench Managed futures product helps investor to allocate some of his investment funds into alternate asset class such as commodities and currencies. This helps investor to avoid excessive concentration in traditional asset classes including equities, bonds and real estate.

SPECIFICATIONS

Details Public Pool Private Pool
 
Minimum Investment $25000 $100,000
Lock-in First 1 month First 3 months
 
Hurdle Rate 5% 8%
 
Management Fee 0.4% per Qtr 0.25% per Qtr
Performance Fee 25% of returns over hurdle rate, charged Quarterly 25% of Returns over hurdle rate,
charged Quarterly

PORTFOLIO MANAGERS PROFILES

Gnanasekar Thiagarajan possesses rich experience in the Commodity and Foreign Exchange markets. Formerly,
a Forex dealer with The Bank of Nova Scotia, one of the largest bullion bank, he presently heads Commtrendz Research, an aspiring hedge fund based out of India.

He is also an advisor to the Multi Commodity Exchange of India Ltd (MCX). A regular columnist for The Hindu Business Line, one of the leading Indian financial dailies, his weekly column on the analysis of Commodity markets is widely read, both in India and overseas. He is regularly invited by various television channels including CNBC to opine on the Commodity markets.

Yeshwant Rao is one of the most respected and sought-after analysts in the Foreign Exchange/ Commodities markets. He is also the co-founder of Commtrendz Research. His views on the Forex market appearing on Reuters newswires have a wide readership all over the world. His present responsibilities include devising Risk Management Strategies for Reliance Industries’ petroleum business, one of the largest Indian conglomerates. He was also the head of Foreign Exchange/ Interest Rate Risk Management of Arvind Mills Ltd., the third largest denim-manufacturer in the world. Earlier he was the chief dealer of Indian Overseas Bank.

 
 
 
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