Canada-based Horizons ETFs and its affiliate AlphaPro Management have announced the launch of the Horizons Auspice Broad Commodity Index ETF (HBR) on the Toronto Stock Exchange. The ETF offers investors diversified, tactical long exposure to up to 12 different commodity futures in the energy, metals and agricultural sectors.
Horizons ETFs has launched the Horizons Auspice Broad Commodity Index ETF (HBR) on the Toronto Stock Exchange.
The fund tracks the Auspice Broad Commodity Excess Return Index (ABCERI), hedged to the Canadian dollar. The index, which is based on commodity futures, was developed by Auspice Capital Advisors, one of Canada’s leading Commodity Trading Advisors (CTA).
The Auspice Index uses a quantitative trend-following methodology that seeks to identify and capture uptrends in the commodity futures markets. It is tactically positioned either long or flat (zero weight) in each of the commodity futures it covers, depending on the direction of the prevailing trend.
The index is positioned long or flat in the futures of 12 diverse commodities: crude oil, natural gas, heating oil, gasoline, gold, silver, copper, corn, soybeans, wheat, cotton and sugar. If the methodology triggers a buy signal on a particular commodity, the index will take a long position in futures contracts on that commodity. Conversely, a sell signal on a particular commodity will prompt the index to take a flat (zero weight) position in that commodity, which is essentially moved to cash.
The index gained 2.45% in January after losing 1.02% in 2012. While the absolute performance was similar to the peer group (S&P GSCI, DBLCI OY, DJ UBS, see chart below) in 2012, the risk adjusted performance was far superior with a lower standard deviation and drawdown. Since the start of publication in 2010 and calculation by the NYSE, the index has outperformed its peers in absolute return and risk-adjusted measures. The strategy is currently positioned long in 5 of the 12 commodities having moved to a flat weight in natural gas and soybeans during the month.
Howard Atkinson, CEO of Horizons ETFs, said: “Investing in commodity futures can be difficult for buy-and-hold investors, who can be punished in volatile markets, even if they make the right long-term directional call on a commodity. Nevertheless, commodities are an important asset class, and they should be considered as part of a diversified portfolio since they historically have demonstrated low correlation to both stocks and bonds. The Horizons Auspice Broad Commodity Index ETF attempts to take the guesswork out of commodity investing, offering investors exposure to commodity futures through an index that has a proven track record of strong performance.”
The Auspice Index methodology incorporates the best practices developed by the experienced portfolio management team at Auspice, and includes tactical component weighting, quantitative risk management and an optimized contract roll strategy.
Mr Atkinson added: “We’re very excited to partner with Auspice once again to offer another sophisticated index strategy to all Canadian investors, regardless of portfolio size or experience. HBR, like our other Auspice offering, will endeavour to provide superior risk-adjusted returns and portfolio diversification benefits for Canadian retail and institutional investors alike.”
Comparative commodity index performance
(Auspice Broad Commodity Excess Return Index [ABCERI] is in yellow)
The ETF has two share classes: Class E shares aimed at retail investors and class A shares aimed at financial advisors.