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Commodities•Coffee, Sugar, Cocoa, Cotton, Orange Juice. CRB Index
Currency•US Dollar index, Euro based pairs, Dollar based pairs, cross rates
Financials• Russell Equity Indexes, NYSE Composite Index
The New York Board of Trade The Global Market Place
Annual Nybot Combined Futures and Options Volume
0
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
14,000,000
16,000,000
18,000,000
20,000,000
22,000,000
24,000,000
26,000,000
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Co
ntr
ac
t V
olu
me
AG Currency Equity
Annual Nybot AG Combined Futures and Options Volume
0
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
14,000,000
16,000,000
18,000,000
20,000,000
22,000,000
24,000,000
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
Co
ntr
ac
t V
olu
me
Sugar Coffee Cocoa Cotton O.J.
Annual Nybot Currency Combined Futures and Options Volume
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
1,800,000
2,000,000
2,200,000
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
Co
ntr
ac
t V
olu
me
Dollar Index Dollar-based Euro-based/Cross Rates
Annual Nybot Equity Combined Futures and Options Volume
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,0001
99
0
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
Co
ntr
ac
t V
olu
me
NYSE Composite Index Russell 1000, 2000, 3000
• Inflation Hedge– Investment which reflects inflation associated with hard
assets
• Diversification – Un-correlated asset class versus stocks and bonds– Good hedge against negative bond performance– Reflects wage inflation inherent in plan sponsor liabilities
• Profit from an inefficient market
• Huberman (1995), Strongin (1995), Froot (1996), Schneeweis (1997), Georgiev (2001)
Why Commodities?
11.00%
11.50%
12.00%
12.50%
13.00%
13.50%
14.00%
14.50%
8.50% 9.00% 9.50% 10.00% 10.50% 11.00% 11.50%
Annualized Risk
Annu
aliz
ed R
etur
n
Bonds
Equities
Commodities
75% Equity
25% Bonds
75% Equity
6% Bonds
19% Commodities
70% Equity
30% Bonds
70% Equity
10% Bonds
20% Commodities
60% Equity
40% Bonds
60% Equity
18% Bonds
22% Commodities
Historic Research
21.96
10.06
-3.00
-1.54
24.45
33.93
8.866.08
10.33
14.00
45.37
3.87
-22.58
-1.72
27.54
0.85
-13.98
-24.68-14.66
0.79
-30
-20
-10
0
10
20
30
40
50
%
Dollar Index Russell 1000 Russell 2000 CRB Index US Bond
Annual Rate of Return
YTD
2003
2 yr
5 yr
COMMODITIES : A View from the Pit
Index Provider 1996 1998 Jun’02 Dec’02 Jun’03
Russell 18.5 27.9 39.3 41.4 45.5
S&P 73.6 64.6 49.9 46.7 42.5
Wilshire 1.1 1.2 1.6 1.9 1.7
NASDAQ 2.0 1.2 0.8 0.6 0.6
Lipper 1.4 1.5 0.8 0.7 0.6
Dow Jones 0.5 0.5 0.3 0.3 0.3
Other 2.8 3.2 7.3 8.4 8.8
Percent of US Equity Investment Products Reporting a Benchmark
Percent of US Equity Investment Product Assets Reporting a Benchmark
0
10
20
30
40
50
60
70
Jun'02
Dec'02
Jun'03
S&P Russell
If this trend continues at the same rate, assets
benchmarked to Russell indexes likely will exceed
those benchmarked to S&P Indexes in the next
12 months
Index Provider Jun’02 Dec’02 Jun’03
S&P 62.5 57.4 49.8
Russell 28.1 32.3 38.9
-30%
-20%
-10%0%
10%
20%
30%
40%
50%60%
70%
80%
90%
100%
110%120%
130%
140%
150%
160%
170%180%
190%
200%
Ju
n-9
5
Se
p-9
5
De
c-9
5
Ma
r-9
6
Ju
n-9
6
Se
p-9
6
De
c-9
6
Ma
r-9
7
Ju
n-9
7
Se
p-9
7
De
c-9
7
Ma
r-9
8
Ju
n-9
8
Se
p-9
8
De
c-9
8
Ma
r-9
9
Ju
n-9
9
Se
p-9
9
De
c-9
9
Ma
r-0
0
Ju
n-0
0
Se
p-0
0
De
c-0
0
Ma
r-0
1
Ju
n-0
1
Se
p-0
1
De
c-0
1
Ma
r-0
2
Ju
n-0
2
Se
p-0
2
De
c-0
2
Ma
r-0
3
Ju
n-0
3
Se
p-0
3
De
c-0
3
Ma
r-0
4
R1000 R1000V R1000G
R1000G-R1000V Optimal Stlye Switch R 1000 Plus Optimal Style Overlay
Style Timing Performance
ATC – Automated Trading Card
EOR – Electronic Order Routing
OBMS – Order Book Management system
