risks.

The following risks may be materially relevant but may not always be adequately captured by the summary risk indicator and may cause additional loss: Counterparty risk, Concentration risk and Model risk. Sustainability risks may lead to a significant deterioration in the financial profile, profitability or reputation of an underlying investment and may therefore have a significant impact on its market price or liquidity. The environmental, social, and governance (“ESG”) considerations discussed herein may affect an investment team’s decision to invest in certain companies or industries from time to time. Results may differ from portfolios that do not apply similar ESG considerations to their investment process.

glossary.

Transition Materials

Essential elements of the transition to a low carbon economy

The global economy is transitioning, transforming three systems: energy, land and oceans, as well as materials, accelerated by the pricing of carbon. As these changes unfold, we are seeing a fundamental re-wiring happening to our economies. In this transition, new technologies will unavoidably depend on key materials.

Please note the Sub-Fund changed its name from LO Funds – Commodity Risk Premia on 2 May 2023.

140m km

of copper cabling
needed by 2030

46%

supply gap in
silver by 2030

2.2 bnm³

of construction lumber
needed by 2030

Source: LOIM research analysis

supply risk hedge

inflation hedge

transition essentials

investment expertise

long-term potential

In the shift to electrification, green mobility, material substitution, and recyclability, we foresee many dislocations in supply and demand.

For example, we anticipate upward price pressures (driven by both demand and scarcity) in copper, nickel, cobalt, aluminium, steel, and lumber among many other materials we constantly keep under review.

In our Transition Materials strategy, we actively seek exposure to these commodity-heavy themes at the forefront of the transition.

the market opportunity.

Past industrial revolutions have, historically, been a core driver of shifts in commodity markets. We estimate as much as USD 24.5 in trillion in capital expenditure may be deployed this decade in the energy transition alone.

And just looking at supply and demand at lithium markets today, we see a clear supply gap.

transition demand.

Commodities can be perceived as a sound investment in the transition. Most of the technologies needed heavily depend on specific materials such as copper, tin, zinc, steel, nickel or cobalt.

exploiting dislocations.

For example, solar photovoltaic (PV) plants, wind farms and electric vehicles (EVs) generally require more minerals to build than their fossil fuel-based counterparts. A typical electric car requires six times the mineral inputs of a conventional car and an onshore wind plant requires nine times more mineral resources than a gas-fired plant.

As transition technologies experience exponential growth, so too will the demand for the underlying commodities with which they are built. Ongoing proprietary research with our dedicated experts looks for dislocations in future supply and demand dynamics of those commodities. We look to exploit these within our portfolios.

Targeting commodities essential to the transition

our strategy.

Our Transition Materials strategy is designed to benefit from the long-term growth potential of commodity-heavy themes at the forefront of the transition.

Access to a broad and diversified basket of commodities identified as essential to the transition.
Exclusion of commodities negatively exposed to the transition, such as all energy fossils related commodities
Supply risk hedge. Direct exposure to upstream components (raw materials and supplies), different from manufacturers you can access with equities
Inflation hedge. Diversifying source of returns, low to negative correlation to traditional asset classes
Long-term potential upside driven by growth demand and sustainable supply chain risk
Fundamental investment framework integrating forward looking assessment of the supply / demand chain driven by the transition
Implemented through a rigorous systematic investment process based on risk diversification principles
Privileged market access with potential broader return opportunities relative to traditional Metals centric commodity benchmarks
12+ years of experience in managing commodity strategies. Stable investment team, leveraging on the roadmaps research team insight as well as LOIM’s wider infrastructure
Benchmark - BCOM Industrial Metals Index and BCOM Global Commodity Index
UCITS funds with daily liquidity

Our investment process focusses on four key areas

Transition supply risk

Forward-looking assessment on supply gap risk

Based on Supply/Demand driven the transition,
adjusted from factors
such as substitution recycling, efficiency

Disruption
risk

Identify short-term trend opportunities

Assess supply/demand disruption through term curve structure
Backwardation / Contango relative arbitrage

Strategic allocation

Systematic risk
Diversification

Based on realised risk of each components
Risk contibution are translated into capital weights

Market structure

Extract alpha from execution

Premia extraction through carry and roll optimisation
Trading algo vs close

Source: LOIM Research. For illustrative purposes only. There is no guarantee that a target objective will be reached (not an accurate indicator).

our themes explored.

copper

Used for electrical conductivity across end market applications, with additional uses in construction and consumer markets.

tin

40% consumed as solder in semiconductors and electronic circuitry, with additional uses in containers, bearing alloys, glass-making and in a wide range of chemical applications.

lumber

Used primarily for construction framing, as well as finishing (floors, wall panels and window frames).

investment team.

commodity investment team.

Stable portfolio management team
Managing commodity strategies since 2011
Part of systematic solution group managing USD 15 billion in AuM

sustainability research team.

Team established in 2019, focused on forward-looking analysis
36 FTE including engineers, data scientists, economists
Sub-team specifically dedicated to understanding roadmap to 2030

	Laurent Joué Head of Systematic Alternatives, Lead Portfolio Manager
	Marc Pellaud, PhD Lead Portfolio Manager

Thomas Hohne-Sparborth, PhD
Head of Sustainability Research

Source: LOIM. Data as at 31.06.2023. Teams are subject to change.

Find out more about our Transition Materials fund, including share classes.

more information

insights.

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important information.

This document is a Corporate Communication and is intended for Professional Investors only. This document is a Corporate Communication for Professional Investors only and is not a marketing communication related to a fund, an investment product or investment services in your country. This document is not intended to provide investment, tax, accounting, professional or legal advice. This document is issued by Lombard Odier Asset Management (Europe) Limited (hereinafter the “Company”).

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