Deriving Long-Term Strategic
Commodity Return Expectations:
Example of the Energy Complex
Q M S Advisors
. .
Av. C.-F. Ramuz, 85 | 1009, Pully | CH
This material does not constitute investment advice and should not be viewed as tel: 078 922 08 77 | 021 711 40 89
a current or past recommendation or a solicitation of an offer to buy or sell any e-mail: info@qmsadv.com
securities or to adopt any investment strategy. website: www.qmsadv.com

Long-Term Energy Markets Returns
Main Significant Factors
Main Factors Driving Our Energy Commodity Forecast:
Global
n We
tio Growth
titu ts ath Global Economic Growth indicators
bs er
Su Effec
Global Energy Intensity factors
t
Supply Capacity: Oil and Gas Extraction, Refinery capacity
Re and men
s
No EC
i on
OP pply
on
Term-Structure: Commodity Futures and Global Interest
Su
n-
vir
lat
En
gu
Rates
Long-Term Global Commodity Inventories and SPR builds
Energy Discipline
Freight
Producers, Consumers, Exporters and Importers Flows
OPEC
Wet
Commodity
(IEA)
Returns
US Dollar Currency Basket
Expectation
Global Risk Aversion Parameter
Ge
es
Sh olitic
Wet freight index
op
elin
oc
ks a l
Pip
Sto Capital Expenditures in the energy complex – Exploration
g Inv And e
rag
Spending
Refi
nin Value
en
tor
ies CFTC reports - Hedgers and Speculators positions
Relative Global weather trends
OPEC Policies and Discipline
Q.M.S Advisors Evaluates All Aspects of the Energy Complex to Derive Long-term Expectations
Q.M.S Advisors Av. C.-F. Ramuz, 85 | 1009, Pully CH | tel: 078 922 08 77 | 021 711 40 89 | e-mail: info@qmsadv.com | website: www.qmsadv.com Page 1

Long-Term Energy Returns
A Structural Approach to Deriving Energy Commodity
Approach
Global
Oil and Gas
Macroeconomic
Supply
Activity
Module
Module
Global Energy Transmission
Integrating
Demand and Distribution
Module
Module Module
Global Energy Refinery /
Products Demand Conversion
Module Module
Source: Q.M.S Advisors, IEA, EIA
These materials do not contain any recommendation to buy or sell or a solicitation of an offer to buy or sell any securities or investment services. Credit Suisse Asset Management, LLC provides no determination of suitability or assurances or
guarantees regarding the performance of any investment or investment strategy. You are responsible for conducting your own independent investigation and analysis, taking into account your particular circumstances, before deciding upon a
particular investment or investment strategy. Investments in certain asset classes, including hedge funds, carry significant additional risks that you should consider prior to investment. You accept complete responsibility for any investment
decisions you may make as a result of your use of this material.
Q.M.S Advisors Av. C.-F. Ramuz, 85 | 1009, Pully CH | tel: 078 922 08 77 | 021 711 40 89 | e-mail: info@qmsadv.com | website: www.qmsadv.com Page 2

Long-Term Energy Returns
A Structural Approach to Deriving Energy Commodity
Approach
Main Factors Driving Our Energy Commodity Markets Forecast
Our model is a composite of seven modules that cover demand, supply, conversion, distribution
as well as transmission constraints. Following are the most significant signals that explain our
forecast of the likely future developments in the Energy markets:
On the demand side:
Demand from institutional investors for assets providing hedges against unexpected
inflation.
Demand growth for energy products. The emergence of China and India as major
commodity consumers with low energy-efficiencies leads to increased energy
demand sensitivities.
Low price-elasticity in developed markets, resulting in little demand destruction
through price increases.
Limited number of substitutes and underdeveloped alternative sources of energy.
A weaker US Dollar, supporting global demand by making international purchases
relatively cheaper.
Q.M.S Advisors Av. C.-F. Ramuz, 85 | 1009, Pully CH | tel: 078 922 08 77 | 021 711 40 89 | e-mail: info@qmsadv.com | website: www.qmsadv.com Page 3

Long-Term Energy Returns
A Structural Approach to Deriving Energy Commodity
Approach
Main Factors Driving Our Energy Commodity Markets Forecast
On the supply side:
• Lack of marginal capacity of production in the Energy complex which affects the
short-term supply/demand equilibrium.
• Limited incremental supply and distribution capacity due to past under-investments
across the energy complex (Lack of oil and gas exploration and R&D expenses,
under-investments in global refinery capacity and distribution channels).
• Long-term supply is essentially a lagged response future price signals. High
marginal costs of production require high future price levels to provide incentives to
commit firms’ capital to volatile long-term investments.
Market derived signals: The current contango in the NYMEX WTI, Gasoline, Heating Oil
and IPE Brent and Gasoil forward curves supports our assumption of price appreciation in
the short run and substantial roll-yield in the longer run.
Other factors: Migration of speculative and institutional capital into the complex,
heightened geopolitical risks, vulnerability of oil infrastructure leading to potential supply
disruptions, lack of transparency resulting in market price manipulation.
Q.M.S Advisors Av. C.-F. Ramuz, 85 | 1009, Pully CH | tel: 078 922 08 77 | 021 711 40 89 | e-mail: info@qmsadv.com | website: www.qmsadv.com Page 4

Long-Term Industrial Metal Returns
Main Significant Factors
Approach
Main Factors Driving Our Industrial Metals Commodity Markets Forecast
Most significant signals in the likely future developments in the Industrial Metal markets:
On the demand side:
Strong relative demand growth for Base Metal products. The emergence of China
and India as major consumers of Base Metals increased Base Metals demand
sensitivities. (Massive investments in local infrastructure).
Lack of price-elasticity, negligible demand destruction through price increases
Limited number or lack of substitutes for Base and Precious Metals.
A weaker US Dollar, supporting global demand by making international purchases
relatively cheaper.
On the supply side:
Lack of marginal production capacity in the short-term in the Base Metals complex
(Aluminum, Copper, Zinc, Nickel).
Depleted inventories (Copper, Nickel).
Limited incremental supply and distribution capacity due to past under-investments
across the Base Metals complex (Depleted mines, lack of specialized labor, limited
dry freight capacity).
Upward cost pressures from labor demands and rising input prices.
Q.M.S Advisors Av. C.-F. Ramuz, 85 | 1009, Pully CH | tel: 078 922 08 77 | 021 711 40 89 | e-mail: info@qmsadv.com | website: www.qmsadv.com Page 5

Rationale for Investing in Commodities
A Holistic Portfolio-Level Approach
Clustering helps define groups of assets with high intra-group and
low inter-group dependencies
Grouping asset classes helps reveal the main
LESS CORRELATED LESS CORRELATED
sources of diversification
Maximum portfolio diversification requires 1
incorporating strategies at both ends of 0.9
the spectrum 0.8
Commodities offer maximum distances
correlation distances
0.7
resulting in greatest diversification
0.6
Caveat 0.5
Commodities may not provide attractive 0.4
alpha in all cycles (contango in commodity 0.3
markets and negative roll-yield) 0.2
Investing in commodities entails high
0.1
volatility and more importantly drawdown
risk 0
Portfolio
U.S. Inflation
U.S. Small Cap
Unhedged
U.S. Bonds
Real Estate
U.S. Cash
Commodity
GS Commodity
U.S. Large
60/40 Portfolio
U.S. Mid Cap
Emerging
60/40
Markets
DJ-AIG
EAFE
Cap
Source: Q.M.S Advisors, Ibbotson, Matlab. Dendrogram based on unadjusted monthly total returns from January 1991 to December 2008. Hierarchical cluster tree based on average correlation matrix distances
Commodities Offer Attractive Returns and Potent Diversification
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Rationale for Investing in Commodities
A Holistic Portfolio-Level Approach
Rationale
Allow for diversification at two levels
At the “beta” level, commodities offer fundamentally different market dynamics.
Commodities offer an opportunity to gain exposure to “real assets”, driven by supply and
demand imbalances
At the “alpha” level, commodities allow for a flexible and efficient use of capital:
• Gain exposure to alpha by actively managing the roll of the underlying contracts
• Generate incremental returns from collateral redeployed in other investment vehicles
• Profit from trading opportunities across commodities by implementing tactical shifts
Offer overall no correlation to traditional 60/40 portfolio returns
Due to low correlations, 60/40 portfolios and commodities did not generate extreme
negative values simultaneously. Periods of large negative portfolio deviations (-2s) were
accompanied by slightly negative average monthly commodity returns
Caveat
Investing in commodities should be viewed as a long-term investment to mitigate
significant volatility and drawdown risk
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Rationale for Investing in Commodities
Breakeven Analysis – Optimal Allocation to Commodities
Expected Returns Required On Commodities For Inclusion In The Current Portfolio At Present Risk Level.
12
Efficient Allocation to
Commodities with current
10 portfolio allocation
8
Expected Return (%)
Expected Return on Current
Portfolio
6
4
2
0
0 5 10 15 20 25 30
Allocation to Commodities (% of total portfolio)
Source: Q.M.S Advisors, Ibbotson. Based on current 60% Fixed Income 40% Equity portfolio. Analysis based on Q.M.S Advisors’ Asset Class Assumptions.
These materials do not contain any recommendation to buy or sell or a solicitation of an offer to buy or sell any securities or investment services. Credit Suisse Asset Management, LLC provides no determination of suitability or assurances or
guarantees regarding the performance of any investment or investment strategy. You are responsible for conducting your own independent investigation and analysis, taking into account your particular circumstances, before deciding upon a
particular investment or investment strategy. Investments in certain asset classes, including hedge funds, carry significant additional risks that you should consider prior to investment. You accept complete responsibility for any investment
decisions you may make as a result of your use of this material.
Q.M.S Advisors Av. C.-F. Ramuz, 85 | 1009, Pully CH | tel: 078 922 08 77 | 021 711 40 89 | e-mail: info@qmsadv.com | website: www.qmsadv.com Page 8