John M. Mulvey
A commodity index is designed as an equal-weighted set of four complementary tactics. The resulting portfolio takes advantage of well-established patterns in commodity markets, including high volatility and the relative independence of the return drivers. These conditions are ideal for achieving rebalancing gains and thusly for improving risk-adjusted performance. Index performance is compared with long commodity indexes and commodity hedge funds. The benefits of an overlay strategy is shown vis-à-vis a traditional stock/bond portfolio.