The Close Enhanced Commodities fund is also one of the first vehicles to invest directly in underlying commodities such as gold, oil and metals. The fund makes no indirect investments in commodities through the shares of mining or natural resource companies, according to Marc Gordon, managing director of Close Fund Management.The fund is structured not as a unit trust but as a closed-ended investment company, listed and traded on the LSE. It will be run by the Close Fund Management team. Asset allocation within the fund will be split evenly, with a third of the portfolio in oil, a third in gold and a third in industrial metals, such as aluminium, copper and zinc. Gordon says the firm has created the fund on the view that there is a compelling investment case for commodities resulting from strong demand from Asia, which is continuing into 2005. “There is a very good portfolio construction rationale for this fund, as people are searching for assets that are not correlated to equities,” says Gordon, adding that commodities generally have a very low correlation to the equity market. The fund is also sterling-denominated, which reduces the dollar risk usually associated with investing in commodities, according to Close. The group is aiming the fund at private investors, advisers and institutions. Close is offering a return of up to 200% of the rise in the three underlying commodities after five years, says Gordon. At minimum, investors will get their capital back at maturity, should commodities fall. Gordon adds that the fluctuations in the global price of oil are not a concern for the fund because of the 200% return that the fund is offering on any rise in the oil price. The fund locked into its oil holding at the end of February at $51 a barrel and the price has gone up $3 since launch, according to Gordon. Last week, the share price of the fund was listed at 103.75p. There is no initial charge on the fund and a 0.35% annual management charge is levied. The fund can also be put into Peps and Isas. In addition to the Enhanced Commodities fund, Close currently offers six other investment company funds, including two hedge fund products.