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Monday, July 06, 2009

Rydex/SGI Intros its Newest Alternative Strategy

Reported by Meredith Mazzilli

Rydex|SGI appears to be continuing its commitment to alternative strategies and making good on hints at commodity alternatives that the Rockville, Maryland-based fund firm made last month at its Alternative Strategies Outlook.

On June 25, Rydex|SGI launched a mutual fund designed to provide long/short exposure to commodities. The Long/Short Commodities Strategy Fund comes in three share classes. A and H shares charge 183 bps, while C shares have an expenses ratio of 258 bps.

The MFWire spoke with Sanjay Yodh, managing director of alternative investments at Rydex|SGI, who noted that the new long/short fund works as a perfect complement to Rydex|SGIís existing managed futures fund. Yodh said that given the market uncertainty, it is optimal to have long-short exposure on a component basis, and recommended between a 5 and fifteen percent portfolio exposure to the new fund based on the investorís risk appetite. He noted that the fundís underlying index has been back tested JPMorgan through 1992, and historically has reacted well in highly stressful times.

The fund seeks to match the daily performance of the JP Morgan Core Commodity-Investable Global Asset Rotator Sigma Long-Short Total Return Index (C-IGAR Sigma). The fund will invest in futures and commodity-linked instruments that are expected to reflect the movement of the underlying index, which employs a quantitative rules-based momentum strategy by examining trends in commodity prices and creating synthetic long or short positions in commodity constituents. The investable universe of commodities for the fund consists of the 14 components of the S&P GSCI Excess Return Index, and the fund will invest in structured notes, ETFs, ETNs in order to gain exposure to the investable commodities.

The strategy is being marketed for its historically low correlation to traditional stock and bond assets, as well its ability to generate returns independent of the direction of the commodities market.


ROCKVILLE, MD -- 07/06/09 -- Rydex|SGI today introduced a mutual fund designed to provide long/short exposure to commodities. Rydex|SGI Long/Short Commodities Strategy Fund aims to match the performance of the J.P. Morgan Core Commodity-Investable Global Asset Rotator Sigma Long-Short Total Return Index -- an index which seeks to capitalize on rising and falling commodities prices.

"We've seen that financial advisors are increasingly turning to alternative investments like commodities for their historically low correlation to traditional stock and bond assets," says Richard Goldman, chief executive officer of Rydex|SGI. "With the launch of Rydex|SGI Long/Short Commodities Strategy Fund, we're pleased to expand our suite of alternative investments to include an investment strategy that seeks to generate returns regardless of the direction of the commodities markets."

The new Rydex|SGI fund can provide exposure to up to 14 different commodity constituents (up to seven long and up to seven short) including natural gas, gasoline, heating oil, lead, Brent crude oil, WTI crude oil, wheat, soybeans, corn, copper, aluminum, nickel, silver and gold. Long and short positions are determined by the rules of the fund's underlying index, which evaluate the historical price trend (and the consistency of the trend) of each index constituent. The index is rebalanced on a monthly basis and features a built-in risk management mechanism that reduces exposure during periods following high historical volatility.

"Commodities have shown the ability to provide significant diversification(1) benefits to an investment portfolio, particularly during a rising inflationary environment," says Sanjay Yodh, managing director, alternative investments at Rydex|SGI. "Given the volatility and directional uncertainty of the commodities markets in general, we believe that a long/short commodities strategy offers a prudent approach to capture momentum while offering risk management potential."

Packaged as an open-end mutual fund, the new Rydex|SGI fund offers long/short commodities exposure without the accredited investor requirements often associated with commodities investing. "As a pioneer in bringing alternatives like commodities, managed futures and multi-hedge strategies mainstream, we're committed to providing these nontraditional exposures along with the structural benefits associated with mutual funds," says Goldman. "Now more than ever, financial advisors are placing a premium on liquidity and transparency. The open-end mutual fund structure offers these and other benefits such as affordability and regulatory oversight."

Rydex|SGI Long/Short Commodities Strategy Fund complements the firm's growing lineup of '40 Act alternative investment mutual funds, including Rydex|SGI Global Market Neutral Strategy Fund and Rydex|SGI Global 130/30 Strategy Fund which launched earlier this year, as well as Rydex|SGI Managed Futures Strategy Fund, which has garnered approximately $2 billion in assets since its inception in 2007. 

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