Commodity Strategies Global Macro Quiz
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What is the distinguishing characteristic of all global-macro investment strategies?
Large amounts of international-equity exposure.
Investment positions tied to the GDP growth of G-7 nations.
The freedom to invest long or short in any asset around the globe.
No micro-cap investments.
Question 1 Explanation:
Bingo! You got it right. Like all global-macro strategies, our Fund uses a broad array of asset classes and investment instruments from around the globe to execute its investment strategy. This flexibility explains why global-macro strategies often have low correlation. The Commodity Strategies Global Macro Fund also has this freedom, but ties it, in some way or another, to a view on commodity prices. This point of differentiation helps explain why the Fund may offer low correlation to stock, bond and even commodity markets, making it a potentially good diversifier for many portfolios.
How is the SilverPepper Commodity Strategies Global Macro Fund different from most other global-macro investment strategies?
Investments are based on a big picture, 10,000 foot view of the world.
Invests in any asset class around the globe.
Flexibility to take either long or short positions in securities.
Every investment decision is tied, in some way, to a view on commodity prices.
Question 2 Explanation:
You got it right! All of the items listed are characteristics of the SilverPepper Commodity Strategies Global Macro Fund. But what really makes our Fund different from run-of-the-mill global-macro strategies is the tether each security in the portfolio has to Galtere’s views on commodity prices. That’s an eye-catching characteristic and a distinguishing feature of the Fund.
How is the SilverPepper Commodity Strategies Global Macro Fund different from most commodity funds?
It has the ability to invest in asset classes beyond commodities.
It has the ability to take either long or short positions, giving the Fund additional avenues for responding to changes in commodity prices.
It can invest beyond precious metal and energy commodities, holding an array of diversifying commodities, including oilseeds, cattle, hogs, corn, cocoa, etc.
All of the above.
Question 3 Explanation:
Congratulations! Unlike most other mutual funds with a commodity focus, our Fund has the flexibility to enter into short positions, invest in non-commodity asset classes, and use other risk-reducing techniques to help protect downside risk. Also, many commodity funds emphasize metals, like gold, or energy staples, like oil. Our Fund typically has exposure to more diversifying commodities that are less commonly found in the typical investor’s portfolio, like corn and cattle. This can play a big role in helping overall portfolio diversification.
Typically, the Commodity Strategies Global Macro Fund, when profiling a trade:
Will only purchase a commodities instrument.
Will only purchase a commodity or a commodity-related equity security.
Will consider buying any asset class—commodity, currency, fixed income, or equity security—that allows them to find more profitable ways to profit and capture an investment theme within the portfolio.
Question 4 Explanation:
Cha' Ching! Galtere will generally execute one of their trading themes using a combination of assets classes and individual securities. These positions, both long and short, allow the Fund more opportunities to thoughtfully capture future changes in commodity prices. Galtere, therefore, takes full advantage of its investment freedom and invests beyond just commodities.
To protect the portfolio against losses, Galtere will use:
Hedges of specific positions or hedges to reduce broad-market risk.
All of the above.
Question 5 Explanation:
Correct, again! Investing in commodities can be highly volatile, as the recent performance of long-only commodity indexes has shown. Our manager, Galtere, has an eagle eye on downside protection. It uses a number of different risk-reduction techniques in an attempt to protect the fund from losses. No guarantees can be made of the Fund’s performance. But attempting to control risk is critical to the Galtere investment process, and a distinguishing characteristic relative to most long-only commodity funds or ETFs.
The Fund’s investment objective is to produce returns that have low correlation with the general stock and bond markets. Low correlation is a valuable attribute because:
It increases total portfolio risk which may, in turn, increase returns.
Low correlation is a key driver of diversification and an important characteristic for reducing risk in an overall portfolio.
Low correlation increases returns with certainty by 25 basis point per annum, according to recent studies by well-respected academics.
Question 6 Explanation:
Yes indeed, you're correct! Stocks and bond portfolios are the classic example of diversification that works. Stocks generally rise when economic growth is strong, while bonds generally rise when economic growth is slowing and investors look for “safe havens” to weather the storm. The low correlation between the two assets (the zig of stocks compared to the zag of bonds) helps reduce overall portfolio risk. Adding additional strategies with low correlation to existing assets in a portfolio can help drive the total risk of the portfolio down even further. All of SilverPepper’s Funds strive to offer investors low correlation to stocks and/or bonds.
The typical, privately-offered hedge fund charges its investors a 2% management fee, plus 20% of the profits, usually above some threshold. The SilverPepper Commodity Strategies Global Macro Fund charges investors:
The same as a traditional hedge fund: 2% management fee plus 20% of the profits.
A higher 3% management fee, but the same 20% share of profits that a traditional, privately-offered hedge fund assesses.
A management fee of 1.99%, but a far lower 10% share of profits.
A 1.50% management fee, with total Fund expenses for the Institutional Class shares capped at 1.99%.
Question 7 Explanation:
Right On! SilverPepper has capped expenses of its Institutional Class shares--which are available for a minimum of $5,000 to all investors who purchase the shares directly from the Fund (see the "Invest Now!" section of our website)--at 1.99%. We do not charge a performance fee. Remember. SilverPepper is "Hedge Fund Experts at Mutual Fund Prices."
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