Our investment philosophy is based on the principles of modern portfolio theory. One of the tenets of this theory is that the addition of an uncorrelated asset with a positive expected return to an existing portfolio will increase that portfolio's risk-adjusted return; i.e. you will earn a higher return for the same risk, or, alternatively, you will earn the same return for less risk.

Our research has shown that our trading program is uncorrelated to a traditional stock and bond portfolio. Hence, we believe that the addition of our program to such a portfolio may increase that portfolio's risk-adjusted return.

Our program is uncorrelated to stocks and bonds because it trades a diversified portfolio of commodity interests. These commodity interests include physical commodities such as precious metals, grains, livestock, and energy products, as well as financial instruments such as foreign currencies and interest rates. We trade these diverse commodity interests using a long-term trend following model in the futures markets.

Long-term trend following refers to a trading style whereby positions are taken in the direction of the long-term price trend. The profitability of trend following going forward depends on the continued existence of long-term price trends. We believe that such price trends will continue to exist in the future. Our reasoning is that market prices are constantly adjusting to new information. Since all market participants do not assimilate instantaneously nor react uniformly to new information, price trends are formed over time. Furthermore, these price trends may persist for a longer period of time than most traders anticipate.

While price trends may be absent in any particular market for an extended period of time, there are often long-term price trends evident in a few markets each year. By trading a diversified portfolio of markets using sound risk management principles, we believe it is possible to capture large profits from positions taken in markets where long-term price trends develop that will exceed the small losses that result from positions taken in markets where long-term price trends do not develop.