New York, 12 Janaury 2011

Credit Suisse and Glencore are aiming to triple investment in their actively managed commodity index this year, leveraging the physical market knowledge of the world's largest commodity trader. Interest in actively-managed commodity indices, which are monitored and adjusted closely by managers, rose last year by luring investors with promises of higher returns than those yielded from many passive commodities funds.

The Credit Suisse Glencore Active Index Strategy (GAINS) returned almost 22 percent in 2010, and Kamal Naqvi, managing director in the Swiss investment bank's commodity division told Reuters he expected far more investors to flock to the product this year.

"2010 was a difficult year to trade for many but the insights from Glencore's physical order book gave the strategy an advantage," Naqvi said, noting the investment in all versions of the index, including swaps, funds and options, currently stood at $500 million.

"When we launched in late 2008 there was a lot of caution towards the product, but now that we have 27 months of real performance we currently have an unprecedented amount of interest. We would be very disappointed if AUM (assets under management) doesn't top $1 billion in 2011, with a target of $1.5 billion."

Switzerland-based Glencore that has been famed for its secrecy in the past is planning a public listing this year that could raise as much as $16 billion. It has had an alliance in commodity trading wit Credit Suisse since 2006.

The GAIN index returned 21.8 percent in 2010, 5 percent more than the DJ-UBS commodity index and well above the 9 percent return on the S&P GSCI last year, both of which are passive indices traditionally favored by investors looking for exposure to commodity prices.

LEVERAGING TRADER KNOWLEDGE

Naqvi said interest in the GAINS index is currently strongest from investors in Europe, Asia and the Middle East, attracted by Glencore's track record in physical trading. "The concept is to allow our clients to leverage the information-related advantages of Credit Suisse's commoditybased relationship with the world's largest physical commodity trader, Glencore," Naqvi said.

"The strategy has significantly outperformed the static benchmark indices and many commodity hedge funds since going live in October 2008."

The index reweights each month based on the views of the heads of the various commodity business areas and their physical order books that are part of the Credit Suisse alliance with Glencore.

"They rate a commodity from 1-5, with one being extremely bearish like in Q4 2008 when the strategy had no exposure to many commodities, to five for very bullish markets where we double our weighting," Navqi said.

"One of the advantages of the strategy is that it tends to result in early entry and exit to individual commodity positions," he said, adding the strategy can move from anything between 100 percent cash to 100 percent in commodities."

By contrast, passive indices take long only positions across a range of commodities at the start of each year and do not alter them regardless of how markets shape up over the 12 months.

Standard indices have been popular with large pension funds and other institutional investors looking for relatively simple products for their initial foray into commodities, but Naqvi said this was changing.

BEYOND THE HEADLINES

"Our initial investors were medium-sized pension funds, high-net worth individuals and family offices," Naqvi said. "We're now seeing more interest from larger institutional

investors and fund distributors - they've been interested for a while, but generally want to see at least two years of real performance before they will invest."

Ends --

By David Sheppard, Reuters – for Commodities Now.

The Credit Suisse Glencore Active Index Strategy (GAINS) funds was voted Deal of the Year in the 2010 Commodity Business Awards.