Featured in EQD’s latest article Commodity Carry, Backwardation, Vol Carry Attract Institutional Attention Amid Market Shifts, Adrien Geliot, CEO of Premialab, shares how our platform hit a record 1,200+ Commodity strategies with over 300 new strategies added in 2024, representing a total of 20% of the 6000+ strategies on the platform.
“Compared to 2023, 2024 saw a strong improvement in the commodity backwardation pure factor (+3.07% versus +0.69%), reflecting renewed supply constraints, particularly in industrial metals, alongside elevated near-term demand amid geopolitical tensions. While congestion remained relatively steady, the commodity volatility and commodity carry pure factors continued to perform well, +2.45% and +0.25%, respectively,” he said, adding, “Commodity trend saw a slight improvement with challenges in capturing directional moves and the commodity value pure factor rose to +2.53%, suggesting that mispricing in certain commodity markets created compelling opportunities,” Geliot said.
“Understanding the underlying exposures of their strategies and assessing the portfolio’s risk ex-ante is crucial. This is where we add value. By receiving position level data from all partner banks, aggregating and enriching it with market data, we compute risk bottom up and measure convexity,” Geliot said. “For commodities, we have developed specific risk dashboards that allow users to break down exposures by sector (long and short) and analyze net positions for each commodity pair within energy, metals, or grains. Allocators can also access relevant exposure across future expiries, and compare forward curves for individual commodities, to contextualize risk and understand strategy positioning. For instance, they can visualize a short position in the front month versus a long position further out on the curve for backwardation. It is also key for allocators to stress test their strategies and portfolio against specific factor moves, with the ability to apply historical, transitive or even custom shocks. For volatility strategies, clients can visualize their portfolio payoff profile under predefined sets of spot and volatility assumptions, capturing the non-linearity of options with full repricing of each individual position,” Geliot said.
