Alternative Energy & Inflation Fund

  • Performance: The Shield Plus Alternative Energy & Inflation Fund has achieved a cumulative net total return of 314.17% from 1/16/2004 to 12/31/2007; that means, a $1 million investment has grown to $4.1 million over the past 4 years. Updated performance can be requested by accredited investors by contacting Shield Plus.
  • Protection: The Fund’s market-neutral approach creates the opportunity (not the guarantee) to capture gains regardless of market direction; Shield Plus investment strategies use only fully-covered option positions with no borrowed leverage.
  • Investment Objective & Portfolio Management: To simultaneously provide the potential for capital appreciation and preservation by employing a market-neutral investment approach. Such an approach combines two opposing positions, such as a long put & long call, and may make money as one position’s gain more than offsets the other’s loss regardless of market direction. Under such combined call & put positions, a loss may be realized if the market remains stable. To enhance the likelihood of capital appreciation, the fund’s investment approach pursues market-neutral positions in the most volatile energy, raw material and inflation-related markets (such as crude oil, natural gas, ethanol and other renewable energy sources, gold, corn, etc.). Emphasis will be placed on achieving protected, absolute returns over a rolling two-year horizon rather than superior performance relative to an index or other benchmarks.

Reasons to Invest

  • With the world population growing by over 75 million people per year (increasing demand) and fossil fuel supply being limited to what is in the ground, the long term trend for energy prices is likely up. We also believe supply disruption or excess versus demand can occur over any short period of time—such events and economic imbalances create price volatility.
  • "$200 Oil? It Could Be Asia's Gift to World" (Bloomberg 10/31/04). This article addresses Asian demographic trends in which population is surging, incomes are rising and oil consumption has nowhere to go but up. This consumption may double from 20 to 40 million barrels per day in 6 to 12 years. Correspondingly, an oil-forecasting group warned that the energy industry may be unable to meet world demand by the end of the next decade (WSJ 9/9/04). And, the International Energy Agency now expects oil and natural gas supply to be tighter in coming years than it had forecast. The IEA doesn't forecast energy prices, but its conclusions imply continued upward pressure on energy costs. "Slower-than-expected growth may provide a breathing space, but it is abundantly clear that if the path of demand doesn't change on its own, it may well be driven to change by higher prices,” the IEA report said (WSJ 7/10/07).
  • Terrorism on U.S. soil could once again shake equity markets—precious metals, like gold, may act as a profitable cross-hedge.
  • The Fund is potentially non-correlated to traditional assets because the market-neutral approach creates a non-linear return pattern and invests directly in different markets (e.g. natural gas, crude oil, renewable energy, gold, corn, etc.). Further, the approach is bottom-up where our focus is on security selection and not on market timing. The Fund’s return patterns are also engineered to limit risk to a certain dollar amount over the rolling two-year horizon. 

This crude oil chart shows energy prices can dramatically climb and fall. The Alternative Energy & Inflation Fund capitalizes on such price volatility by being net long options.