What is TAP?

Gresham’s Tangible Asset Program^® (TAP^®), is a long-only, diversified, tangible commodity futures program that balances rules-based construction with market-driven implementation.

TAP is structured to maximize return through implementation and minimize volatility by constraining sector and individual commodity weightings. The Program is rebalanced when price changes cause the actual allocations to deviate substantially from the prescribed weightings.

Some characteristics of TAP’s approach:

• Long Only: provides consistent exposure to tangible commodities as an asset class.
• Diversified Tangible Commodity Futures: TAP is implemented using futures (except LME forward contracts on industrial metals) on a diversified group of 23 tangible commodities that are weighted in accordance with the economic significance and market liquidity of the individual components.
• Traded in accord with a systematic program: TAP is a systematic strategy designed to maximize investability, scalability, and transparency of the investment portfolio.

TAP offers meaningful rules-based exposure to commodities as an asset class, and provides:

• Diversification to an investment portfolio of other asset classes;
• Better inflation protection than portfolios that do not include commodities;
• Excess returns over commodity benchmark indices.

TAP is structured in accordance with Gresham’s own methodology. Its 20-year track record provides an unparalleled benchmark for commodity investment.

History of TAP

In 1987, when Dr. Henry Jarecki first applied asset allocation principles to commodity investments, there were no investable and liquid diversified commodity funds available to investors. While the Commodity Research Bureau (CRB) Index was published, it was not an investable product and its methodology was not based on economic significance or liquidity of tangible commodity markets.

Dr. Jarecki, a pioneer in commodity futures investing, realized that he had to create his own commodity investment program. In January 1987 he implemented the first TAP portfolio comprising 11 commodities across 5 commodity groups, the weights of which were determined by the global production value of these commodities and the liquidity of their futures contracts. TAP continues to use both economic and liquidity weighting factors, but now comprises 23 commodities organized in 6 groups.

Thus, TAP is probably the earliest diversified commodity program with an actual track record.

TAP's Methodology

TAP’s methodology balances rules-based portfolio construction with market-driven implementation.

• Components Selection: To ensure relevancy and adequate liquidity, Gresham’s analysts each year identify the values of commodities produced and traded - in six groups:

• To avoid sudden year-to-year changes caused by short-term dislocations, production and liquidity measures are averaged on a rolling basis.
• Weighting: Gresham selects and weights the most economically significant and liquid commodities within each group.
• Constraints: In order to control over-exposure and volatility of the program, Gresham constrains the weightings of individual commodities within their groups and of commodity groups as part of the overall program.
• Consistent exposure through rebalancing: Commodities are rebalanced to their target weights in the course of the year if price changes cause their actual allocations to deviate substantially from the initial weights.
• Market-driven implementation: As a futures contract nears its last trading date or first delivery date, positions are rolled into later contract months. Because this rolling process is discretionary and based on the managers’ assessment of market liquidity and roll spreads, Gresham’s experienced team may add value by managing the rolling process effectively.
• Earning Collateral Yield: Futures positions require an initial good faith deposit or margin equal to a fraction of the notional value of the position. That deposit, which is invested in US Treasury bills, is held in a segregated account by the futures clearing broker, while funds in excess of futures margin requirements are invested in a money market or enhanced money market fund.

Investing in TAP

Gresham currently provides the TAP methodology to qualified purchasers through investment banks in a commingled fund. Gresham also manages separate accounts for financial institutions and family offices.

For more information on TAP and how to invest with us , please see Investing with Gresham.