Glossary: Alternative Investments — Natural Resources & Commodities

TermDefinition
Raw landUndeveloped land with no improvements; returns come solely from appreciation; highest risk among land investments
FarmlandAgricultural land that generates returns from crop production (operating income) and land appreciation; low correlation with traditional assets; inflation hedge
TimberlandForest land managed for timber production; returns from harvest sales and land appreciation; biological growth provides natural production regardless of economic conditions
TIMO (Timber Investment Management Organization)A specialized firm that manages timberland investments on behalf of institutional investors; handles harvesting, replanting, and land management
CommodityA basic physical good (raw material) used in commerce that is interchangeable with other goods of the same type; traded on spot and futures markets
Soft commodityAgricultural commodities that are grown rather than mined (e.g., wheat, corn, coffee, cotton, sugar, cocoa)
Hard commodityNatural resources that are mined or extracted (e.g., gold, silver, copper, oil, natural gas, iron ore)
ContangoA futures market condition where the futures price exceeds the spot price (); results in negative roll yield for long futures holders
BackwardationA futures market condition where the futures price is below the spot price (); results in positive roll yield for long futures holders
Convenience yieldThe non-monetary benefit of holding a physical commodity (e.g., ability to meet unexpected demand, avoid supply disruptions); reduces the futures price relative to spot
CTA (Commodity Trading Advisor)A professional or firm that uses futures contracts to implement systematic (often trend-following) investment strategies across commodity and financial markets
SMA (Separately Managed Account)An individually owned investment account managed by a professional; provides customization and direct ownership of securities, unlike a pooled fund
Commodity ETFAn exchange-traded fund that provides exposure to commodity prices, either through physical holdings, futures contracts, or equity of commodity producers