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Alternative Market Briefing

Actively managed funds fare best in agricultural trading segment

Tuesday, November 12, 2013

Chad Burlet
Benedicte Gravrand, Opalesque Geneva:

"There are not a lot of good ways to participate in the agricultural sector," said a CTA manager during the recent Opalesque Hard Assets Roundtable. "There are some trend followers that have not fared well over time. The long-only strategy is flawed, as is the ETF strategy, and they have generated poor results. There is a very small universe of actively managed agricultural CTAs, and that’s serving us well."

"The primary source of Alpha in our sector is found in spreads and in options," Chad Burlet notes during the Roundtable. "Spreads can be inter-commodity spreads, intra-commodity spreads, like calendar spreads, or inter-exchange spreads; like Kansas City Wheat versus Chicago, or Chicago vs. Minneapolis. Options are a good fit for our fundamental approach because of their longer time horizon. Some of the random noise that occurs in flat price trading is also less of an issue in options."

Burlet is Principal and Chief Trading Officer at Third Street AG Investments, LL, which he and Bob Otter formed in December, 2012. Both are veterans of the grain and soy markets.

Third Street AG Investments runs a fundamental discretionary agricultural trading program with a very narrow focus on corn, wheat, and soybeans. The managers monitor worldwide production, grain flows and consumption and identify dislocations and mis-pricings that take pla......................

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