Sticks & Stones: Our Commodities Risk Premia Primer

What makes the commodities asset class an exceptional diversifier? Commodities stand apart from equities and fixed income, as their drivers relate more to practical considerations (hedging for commodity consumers & producers) and not just alpha generation. Behavior of the commercial participants follows their own self-interested economic rationale, and these ongoing patterns are fertile ground for risk premia strategies to monetize relationships within one commodity and across the broader space. We offer readers a look at some of the most common ways to make money within the commodities risk premia space; our team has a long history of creating novel approaches, and our legacy approaches have stood the test of time, including Trend, Carry, Skew, Basis Momentum and Positioning (VHP), alongside more recent work. Within the commodity risk premia space, average pairwise correlation is exceptionally low, and the correlation of these strategies with respect to multi-asset portfolios is also