RCMA Capital LLP : Merchant Commodity Fund

Summary

Commodity focused global macro fund which employs a discretionary, fundamental approach combining bottom-up analysis and macro inputs.

Detailed supply and demand analysis utilizing extensive real time insight into the physical commodity markets.

Not long-biased. The strategy can and does run net short when conditions dictate.

Relative value trades are based on real physical linkages between commodities.

Position limits established per commodity, contract and instrument to ensure a highly liquid portfolio.

Investment Strategy

The fund employs a fundamental approach to commodity markets, seeking to profit from the identification of how price relationships across time curves, between geographies and between qualities and grades of various commodities will evolve over time.

The fund trades exchange-cleared derivatives (futures, options and swaps) and expresses both directional and relative value views with a focus on energy, agriculture, soft commodities, industrials and freight.

The investment team combines deep supply and demand analysis with signals generated from the physical commodity markets, including information flows from the RCMA Group, a physical commodities trading and supply chain management firm which is majority owned by the shareholders of RCMA Asset Management.

Risk Management

Four Key Elements:
1. A Parametric VaR model (20 day correlation, 21.5% volatility at 95% confidence)

2. A daily stress test and a stress limit of 7.5% of AUM

3. Profit and loss determined Management Action Triggers (MATs) which drives the de-risking process. MATs precipitate discussion on how to handle budget drawdowns. e.g. reduce a position, change a position, liquidate a trade, institute a hard stop. Extra analytical time is spent on extreme value movements (e.g. tail risk) via historical VaR, stress testing and scenario analysis.

4. Peak to trough de-risking triggers at -5% year-to-date or from high watermark and at -10% year-to-date from high watermark