Introduction The aim of this post is to give the baseline portfolio weights of the Polar Star Diversified Commodity Fund. We employ the Black-Litterman methodology to tilt the allocations slighlty toward the underlying fund the greater return expectations and confidence. For more details on the process please see this link as well as other referenes therein.
Baseline Weights To obtain baseline weights, we perform a risk-adjusted return portfolio optimisation with the returns stream of the three underlying funds