ACAR
The Alternative Commodity Absolute Return (ACAR) strategy is an alternative markets CTA. The strategy systematically applies modern trend-following technology to a globally diversified set of commodity markets. These markets exist at the periphery of the established futures landscape, and feature participants whose incentives hinge on production and consumption decisions, rather than speculation. Our focus on this specific market universe derives directly from one of the core tenets of our investment thesis: expected returns from trend-following should be higher, and correlations lower, across markets in which there is less capital competing for the same source of return. The ACAR team believes this is a defining characteristic of the alternative commodity markets, due to their operational complexity, limited transparency, and liquidity constraints—features which create fertile ground for the systematic harvesting of trend-following alpha, while simultaneously presenting significant barriers to entry.
STRATEGY HIGHLIGHTS
- Portfolio Diversification
- A high degree of physical, temporal, and geographical heterogeneity across more than 60 markets yields a significant number of independent factors and portfolio diversification.
- Low Correlation to CTAs
- A singular focus on alternative commodity markets translates into lower correlations to traditional managed futures programs.
- Frontier Market Access
- Gresham has a specialized facility for gaining exposure to highly access-constrained, "frontier" commodity markets.
COMPETITIVE EDGE
- Alternative Market Pioneers
- The ACAR team helped pioneer the application of trend following systems to alternative commodity markets.
- Extensive Experience
- Together with its original parent company, The Falconwood Corporation, Gresham has more than 30 years’ experience in trading and operational aspects of implementing and risk-managing commodity futures portfolios.
- Institutional Infrastructure
- Clients can rely on Gresham’s operational experience and blue-chip systems and controls to alleviate barriers to entry.
RELEVANT RESEARCH
- Babbedge & Kerson 2019 “Trend’s not Dead (It’s just moved to a trendier neighborhood)”.
- In this white paper, GreshamQuant examine the low performance of mainstream market trend following over the past decade. The reason for this was not found to be due to over-crowding or a breakdown in the trendfollowing process itself, rather, it was due to a change in the behavior of those markets. By using a novel dataset of alternative commodity markets, GreshamQuant show how a set of simple selection criteria can identify a set of markets with inherently higher ‘trendiness’.
AWARDS
View awards accruing to the ACAR Strategy.
