Cornerstone’s International Value Program is a quantitative global macro approach, launched in 1997.  It takes mainly fundamentally driven, directional positions in the developed country fixed income, currency, commodity and equity markets.  A collection of econometric models underlies the portfolio.

The Real Commodity Analysis Program combines two of Cornerstone’s strengths: expertise in developing systematic fundamental models and a long history of trading real commodities. The program distinguishes itself by bringing modern econometric research methods to bear on the commodity markets, which have historically been traded mainly on a discretionary basis.

Cornerstone Quantitative Investment Group was incorporated in April 1995. Based in Stamford, Connecticut, it has been registered as a Commodity Trading Advisor since February 1996 and as a Commodity Pool Operator since September 1997. Cornerstone is also a member of the National Futures Association. The company is equally owned by its two principals, John Eckstein and Adam Dunsby.

The three Quantitative Asset Allocation strategies account for about 70% of International Value.  These strategies use econometric models to form independent, directional portfolios in three asset classes based on a quantitative analysis of the economic environment as expressed in financial and economic factors.  The asset classes currently represented are short term interest rates, currencies, and government bonds. There are between seven and nine developed countries’ securities within each asset class.  For each security we use our models to forecast return and volatility.  These forecasts allow us to combine the securities balancing risk and return.  The resulting position is typically composed of both longs and shorts and usually has a directional bias.

All the inputs to our models are based in both theory and experience, that is inputs to our model must have a solid economic rationale for working and must have showed good predictive properties in the past.  The inputs to our model are mainly fundamental factors, but we use a small amount of momentum information as well.

Real Commodity Analysis, about 20% of exposure, uses mainly fundamental  information to forecast directional moves of various commodity futures. 15 commodities are traded, including energies, grains and base metals.  A wide variety of fundamental factors are used, for example proxies for supply and the price of substitute goods.  Technical factors are used as well.

We collect several smaller strategies into an Other Systematic grouping which accounts for about 10% of expected profit.  These strategies include value based stock index investment, fixed income trend following, a fundamental model to trade the Mexican Peso and yield curve relative value.

Risk control is explicit in multiple steps in the investment process. Our primary risk management tool is Value at Risk, which is calculated using our volatility models.  Each asset allocation portfolio has its own Value at Risk target, which is met every day.  In addition the risk off all five strategies and the interactions among them is aggregated at the fund level. We also augment these models with historical simulations of our positions.  Finally, we have hard position limits which constrain possible exposure.

Real Commodity Analysis is designed to make global macro trades, that is, mainly directional positions (both long and short) based on analysis of the factors which move markets, but within a systematic framework. The goal is to take the emotion out of investment decisions and to look only at the information that can pass two tests: it must be economically intuitive, and Cornerstone must be able to prove that it has been useful in forecasting returns in the past. In the commodity markets, factors which pass these tests include: the shape of the forward curve, measures of supply and demand and momentum.

Robustness is a major consideration in determining factor weights. Combining multiple factors into one signal produces more reliable signals than by looking at any one factor.

Metals, Energies, Grains, Livestocks, Softs

Approximately USD $553 million

C-View’s approach is short-term and discretionary, combining fundamental analysis, technical analysis and an understanding of market psychology. In addition, C-View accesses flow information from major dealing rooms to assist in determining market views. The average trade is 10 days.

The firm was established in the UK, September 1996, and became a registered Commodity Trading Advisor and member of the National Futures Association in April of 1998. Its philosophy is based on the view that while investors may be sometimes looking for very high returns, they are rarely comfortable with the drawdowns and exposure required to achieve those returns. C-View believes there is an investor appetite for returns from currency in the mid to high teens with smaller drawdowns.

C-View favours a portfolio approach, which enables maximum profits to be generated within a disciplined, low-risk environment. C-View will carefully analyze the relative values of a wide range of currencies and construct a portfolio of positions when risk/return ratios appear to be above average. The positions are based on the potential for currencies to appreciate or depreciate. This approach may be supplemented by the running of positions for yield; from time to time there are sizeable differences in interest rates between currencies, but subdued or beneficial exchange rate movements. These positions are taken on an outright basis using forwards of up to three months. On occasion, C-View will undertake longer dated forwards and options.

C-View supplements the portfolio strategy with shorter-term, opportunistic trading of the major currencies. This is not only when currencies are fluctuating within a pre-determined trading range, but may also be when a particular short-term trend is identified.

USD $577 million

Currencies

A combined strategy of short to intermediate-term trading designed to profit from periods of increasing volatility; broadly diversified in approximately 45 global markets.

Grinham Managed Funds Pty Ltd (GMF) is a Commodity Trading Advisor registered with ASIC (Australian Securities and Investment Commission) and holder of an Australian Financial Services license. The company is also registered with the Commodity Futures Trading Commission as a CTA and is a member of the National Futures Association. The company was formed in March 1993 under the name of Grinham Managed Futures Pty Ltd and changed its name to Grinham Managed Funds Pty Ltd in April 2000.

GMF commenced research into trading systems and portfolio theory using proprietary software in 1990. The research aimed to capitalize on the directors' experience in mathematical modeling, using non-linear techniques and chaos theory. To validate their hypothetical results, the trading of a House Account on a broadly diversified portfolio of futures markets began in June 1992. From September 1993, GMF has been managing accounts using its trading systems under the regulatory structure in Australia and the US that enable it to operate as a CTA.

GMF primarily employs trading strategies that utilize mathematical analysis of technical factors relating to past market performance. The buy and sell signals generated by a technical trading strategy are based upon a study of actual intraday, daily, weekly and monthly price fluctuations. The profitability of any trading strategy based on this type of historical analysis is determined by the relationship of future price movements to historical prices and indicator values, and the ability of the strategy to adapt to future market conditions. For example, if GMF employs a particular strategy which has been successful in periods of sustained price movement in one direction in various markets, the future performance of this strategy may be determined by the relative frequency in the future of these sustained movements. GMF attempts to develop strategies, which will be successful under many possible future scenarios.

Since the inception of the trading program, GMF has endeavored to improve its trading systems by the stepwise implementation of well-researched enhancements. The program initially was traded on just 12 markets with only one system. Through a series of consistent additions, this has increased to 45 markets and fourteen systems. It is anticipated that in order to improve the risk/reward profile of the system, further changes will be made in the future. GMF is constantly undertaking research into techniques to improve the trading. It is anticipated that any improvements will come in the form of further diversification within the existing trading system as opposed to any significant changes to the current model. Changes will have two forms. First, additional markets will be added to increase the diversification. This will further improve the return/risk profile of the trading. Secondly, GMF will increase the system diversification by adding new systems that are robust and trade a balanced portfolio provided they have a low correlation to the existing systems. This will allow better implementation of the ideas that make the trading models successful by reducing the reliance on particular parameter sets.

Approximately USD $1.13 billion

Metals, Energy, Commodities, Currencies, Interest Rates, Stock Indices

Intermediate to long-term, commodity-based program with a major emphasis on fundamental analysis.

Mississippi River Investments Corporation was organized in Tennessee in 1978 and began managing outside money in 1986. It is an investment management firm that specializes in commodity sector trading.

Mississippi River’s management team is led by John R. Bondurant, who has served as the company president since its incorporation in 1978. He has been involved in the community trading business for nearly 30 years, first entering the market full-time as a registered broker with Barnes Brokerage Company in 1968. He has served as a director and president of the Memphis Board of Trade, and as a director of the Memphis Cotton Exchange.

Memphis is still the cotton capital of the world and barges now use the route to carry grain to New Orleans to be exported globally. This is still one of the main reasons why Mr. Bondurant is based in Memphis. Mr. Bondurant personally owns about 15,000 acres of farmland spread among six farms in the Southern U.S. Management of the farms helps his trading by providing insight into the agricultural complex. Approximately 20% of the firm’s assets under management is from the firm’s principals and all of the money is traded identically (although the fees differ).

Mississippi River Investments bases its decision-making process on fundamental analysis. Management puts much faith in the relevancy of statistical studies of the supply and demand factors as they apply to the cash and futures markets. Technical analysis, though subordinate to the fundamentals, is also taken into consideration. This focus on fundamental analysis means that the trading program is not necessarily as diverse as more traditional ventures into the futures market. As mentioned above, Mr. Bondurant is a long-term trader who will hold a winning position for up to 8 to 9 months. Mr. Bondurant states that, “At my absolute best, I have only one position on and at my worst, I’ll have roughly five.”

USD $60 million (approximately 12% is proprietary capital).

Metals, Energy, Commodities, Currencies, Interest Rates, Stock Indices

Long-only passive investment in a basket of commodities.

Beeland Management Company, L.L.C, an Illinois limited liability company, was organized in 1998. James Beeland Rogers, Jr. is the majority member of Beeland. Beeland has been registered with the CFTC as a Commodity Pool Pperator and a Commodity Trading Advisor since March 11, 1998, and is also a member of the National Futures Association.

The objective of Beeland’s trading method is to replicate, as closely as possible, the positions represented by the Rogers International Commodity Index. Beeland attempts to achieve this objective by constructing a portfolio of futures and forward contracts consisting of the appropriate weight of the underlying components of the Index.

The Rogers International Commodity Index represents the value of a compendium (or "basket") of commodities employed in the global economy, ranging from agricultural products (such as wheat, corn and cotton) and energy products (including crude oil, gasoline and natural gas) to metals and minerals (including gold, silver, aluminum and lead). As of March 31, 2007, there were 36 different contracts represented in the Index. The value of each component is based on monthly closing prices of the corresponding futures and/or forward contracts, each of which is valued as part of a fixed-weight portfolio. Near month contracts on international commodity markets are employed to the extent possible. The selection and weighting of the portfolio is reviewed not less than annually, and weights are assigned in the December preceding the start of each new year.

The Index was developed by Jim Rogers to be an effective measure of the price action of raw materials on a worldwide basis. The broad based representation of commodities contracts is intended to provide two important characteristics: The large number of contracts and underlying raw materials represents "diversification" and the global coverage of those contracts reflects the current state of international trade and commerce. Accordingly, In many cases, allocation of a portion of an investment portfolio in a product based on the Rogers International Commodities Index may reduce overall volatility while providing the opportunity to profit, assuming the continued growth of the global economy and that such growth translates into higher prices for those commodities.

USD $370 million (RICI^SM only)

Metals, Energy and Agriculatural Commodities