The investment objective of the Trust will be to maximize absolute returns from its portfolio of foreign currency forward contracts and exchange-traded futures contracts that may involve commodities, currencies, interest rates and certain eligible stock or bond indices while seeking to reduce the risks and volatility inherent in those investments by taking long and short positions in historically correlated assets. The Trust also expects to earn interest on the assets used to collateralize its trading positions. The return on assets in the Portfolio, if any, will not be intended to track the performance of any index or other benchmark. There is no assurance that the Trust will achieve its investment objectives.
A forward contract is an agreement between two parties, one of which undertakes to purchase from or sell to the other, on a specified future date, a specified quantity of a specified asset at a specified location in exchange for a specified purchase price. At the discretion of the Advisor, the Trust may enter into foreign currency forward contracts. See “Business of the Trust—Investment Objective; Strategies—Forward Contracts.”
Futures contracts are standardized forward contracts traded on an exchange. At the discretion of the Advisor, the Trust may engage in trading activities with respect to futures contracts that may involve commodities, currencies, interest rates and certain eligible stock or bond indices, as described elsewhere in this prospectus. See “Business of the Trust—Investment Objective; Strategies—Futures Contracts.”
Futures contracts are customarily bought and sold on margins that represent a very small percentage (ranging upward from less than 2% to 5%) of the purchase price of the asset underlying the futures contract being traded. Similarly, it is expected that the Trust will be required to satisfy certain collateral requirements set forth by its over-the-counter counterparties with respect to the Trust’s forward contracts trading obligations. Interest paid on the Trust’s cash positions, together with any interest paid on collateral deposited as margin, net of expenses, will be reinvested.
The Advisor will act as the commodity trading advisor for the Trust. The Advisor will invest cash proceeds from the sales of Baskets in short term United States government securities and other financial instruments that, in compliance with the rules of the futures exchanges and other markets where the Advisor, on behalf of the Trust, will trade, are eligible to secure the Trust’s trading obligations in respect of a portfolio of foreign-currency forward contracts and exchange-traded futures contracts selected by the Advisor following strategies that utilize quantitative methodologies to identify potentially profitable discrepancies in the relative values or market prices of one or more assets and seek to control the risks and volatility of these investments by taking long and short positions in historically correlated assets. These strategies may include:
• Yield and Futures Curve Arbitrage Strategies which seek to take advantage of pricing and yield differentials by investing in assets with exposure to currency, bond, interest rate and commodity markets while shorting similar assets in other markets.
• Technical Strategies which seek returns by capitalizing on patterns of market sentiment, return momentum and return reversal in different asset types. When implementing these strategies, the Trust may hold long or short positions.
• Fundamental Relative Value Strategies which seek returns by attempting to identify instances where there are discrepancies between the market and fundamental values of an asset and trading long or short positions in that asset.
See “Business of the Trust—Investment Objective; Strategies—Investment Strategies” and “—Portfolio Construction.”
Characteristics of an Investment in the Shares
The Shares are intended to constitute a relatively cost-effective means of achieving investment exposure to non-traditional asset classes. An investment in Shares will be:
• Listed. Although there can be no assurance that an actively traded market in the Shares will develop, the Shares will be listed on NYSE Arca under the symbol “ALT.”
• Relatively cost efficient. Transactions in the asset classes that the Advisor, on behalf of the Trust, will invest or trade in entail certain expenses. Nonetheless, because the expenses involved in the Portfolio will be dispersed among all Shareholders, an investment in the Shares may represent a cost-efficient alternative to investment positions in the same asset classes for investors not otherwise in a position to participate directly in the markets for physical commodities, foreign currencies, interest rates, or futures, forwards or other over-the-counter derivative contracts involving those assets. See “Business of the Trust—Investment Objective; Strategies.”
The Shares will be eligible for margin accounts.