CHICAGO, March 7 Mellon Capital Management has launched a commodities fund aimed at a growing number of inflation-wary institutional investors, its manager said on Monday.
The Commodity Alpha Long-Bias Strategy initially was conceived as a diversification vehicle -- an addition to equities and fixed-income exposure, but increasingly clients are asking about the potential for higher-than-normal inflation and how to manage it, said Mellon Capital managing director Eric Goodbar.
Goodbar, who has worked as alternative investment strategist for 26 years, said the strategy is "a mainstream product" aimed at institutional clients. It uses a custom benchmark, a "volatilty-adjusted" version of the Dow Jones UBS Commodity Index that offers trading opportunities as well as an inflation hedge.
For example, "there's usually a pretty heavy proportion of energy" in the Dow Jones index, but our assessment "might find it opportunistic to be net short energy," Goodbar said. The "beta" of the strategy hedges inflation, while its "alpha" component offers active management, he said.
The fund trades futures contracts listed on U.S. exchanges, with the exception of certain energy contracts traded outside the United States. The fund does not trade options or over-the-counter instruments.
Goodbar declined to reveal its open positions.
As its name implies, the fund has a long bias, a strategy sometimes viewed by researchers as more volatile than others. But "we believe it (the fund's strategy) will be less volatile than a public benchmark," Goodbar said.
He declined to give the fund's total assets under management, stating "it's only been out there a short time." The fund was opened in late January.
Founded in 1983, Mellon Capital Management had $208 billion in assets under management as of Dec. 31, 2010, according to the company. Assets include those managed by dual officers of Mellon Capital Management Corp, The Bank of New York Mellon (BK.N) and The Dreyfus Corp. Mellon Capital is part of BNY Mellon Asset Management. (Reporting by Suzanne Cosgrove; Editing by David Gregorio)