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Alternative Investments - November 16, 2007

Till and Lhabitant State-of-the-Art Commodities Investing Seminar to return to London in January 2008

A five-year rally in prices and several multi-billion dollar commitments by leading pension funds have drawn the attention of institutional investors to commodities. Still in its infancy, commodity investment has enormous growth potential and offers considerable rewards to money managers who understand its unique characteristics, benefits and challenges.

More than $200bn has flowed into commodity markets over the past five years, fuelling the rapid growth of investable indices and leading to a proliferation of new investment opportunities. Among the options for investors seeking exposure to commodities are: buying into natural resource companies, implementing a commodity futures programme, investing in long-only futures indices and their derivatives or via managed accounts, commodity pools, mutual funds, hedge funds and funds of funds.

Financial investment in consumable and transformable assets is a very recent phenomenon and one of modest magnitude relative to the size of the underlying commodity markets or in comparison with other alternative classes and strategies.

However, this emerging asset class should not be overlooked: the long-term economic fundamentals point towards higher commodity prices and the historical record makes a clear case for including natural resources in portfolios. Over nearly half a century, commodity futures have returned over 10% annually while providing a solid hedge against inflation and performing strongly in bear equity and bond markets.

Commodities are not capital assets; therefore, they cannot be priced with traditional financial models or evaluated through discounting approaches. Investment managers need to recognise the specificities of natural resources and understand their short and long term performance drivers to adapt their asset and risk management processes to commodities. Advisers have a key role to play in helping investors define their optimal commodity allocation, choose a suitable benchmark, select appropriate vehicles from an expanding set of products, and conduct due diligence.

Designed and delivered by two leading experts in the theory and practice of commodities trading and alternative investment, the intensive Till and Lhabitant State-of-the-Art Commodities Investing Seminar in London on 21-22 January 2008 will equip participants with a comprehensive overview of natural resources markets, a thorough understanding of the importance of commodities as an asset class, and the state-of-the art techniques for designing futures programmes and implementing institutional commodity investments.

Presented in a highly accessible manner and drawing from the latest results of alternative investment research, the Till and Lhabitant seminar appeals to fund managers, investment officers and administrators working for institutional investors and family offices, and to consultants and key account representatives advising high net worth individuals and institutions on commodity investments.

In another EDHEC presentation, Joëlle Miffre, Associate Professor with EDHEC Business School, will also be speaking on the topic of state-of-the-art commodities investing at the EDHEC Alternative Investment Days 2007. Professor Miffre will notably be exploring how commodities can be used in both strategic and tactical asset allocation.

A copy of this presentation can be found below, along with some of Joëlle Miffre and Hilary Till's more recent research papers on the subject.