UBS launches multistrategy commodity platform

Comm-PASS will be offered as an index with daily information available through Bloomberg and other information providers.

“What UBS has done is construct an algorithmic strategy that can be tracked through the Comm-PASS reference index, with structured products then constructed from that index,” said James Paget, co-head of EMEA structured commodity sales at UBS in London.

The index references a portfolio of 19 commodity futures markets, each of which has an independent algorithm. In addition, there is a basket of strategies modelled, with the ability to go short paramount.

“In offering this product, we incorporated a unique tailored algorithm for each of the underlying commodities, incorporating trending and counter-trending features as relevant for each individual commodity,” Paget said.

Trending refers to the fact that all commodities do not react in the same way to changes in the market. Energy commodities, for example, tend to experience a significant “kick up” in price in times of scarcity. Commodities referenced in the index are subjected to liquidity benchmarks before inclusion.

Additionally, the weighting of the basket of strategies used in the product is decided on a mix of performance and subjective criteria. “The institutional investor base is increasingly moving into commodities, and this kind of diversified exposure to the sector as a whole would also appeal to them, although we are aiming for as broad an audience as possible for this product,” Paget said.

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