Commodity Fund - Questions

J

JTrader7

Hello fellow Elite Traders,

Could anyone please help me out with a couple of questions that I have relating to commodity funds?

1. Is it is necessary for non-US based funds / fund managers dealing in commodities to register with the NFA / SEC? I'm based in Asia and have plans to register a commodity fund in Cayman Islands.

2. Re pooling and adding new investors money - Can anyone please confirm how to handle capital additions when tracking a commodity index - Example - I track a weighted index of 20 commodities - I have £1M in my fund and another investor adds a £50K investment in my fund - How do I evenly allocate this new capital according to the prescribed weightings on 20 commodities? This amount would buy 5 - 6 commodities (full margin) at best. There seems to be a way to do this as there are many commodity funds offering minimum investments of $100K or less.

Thanks in advance for any answers to the above

Best regards
JTrader
 
1) foreign fund, managing non-us money, non-us managers: no need to deal with SEC, NFA or CFTC or any other US government entity including the IRS.

2) hire a quant to solve this problem.
 
Buzzy, thank you - no need to register with NFA etc that's good news.

Regarding the 2nd question - does anyone know how commodity index funds allocate small capital additions? I can't see how this works in practice - quant or no quant - you can't divide a commodity contract into a smaller quantity than 1 contract -

Can any quants / commodity fund managers please offer your thoughts?
 
Quote from JTrader7:

Re the 2nd question - does anyone know how commodity index funds allocate small capital additions? I can't see how this works in practice - quant or no quant - you can't divide a commodity contract into a smaller quantity than 1 contract -
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the quant's job is to find small portfolios that statistically best tracks the index. Tracking errors will not be zero but will be statistically minimal giving the constraints you are imposing.
 
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