Ideas from academic disciplines such as physics and computer science have long been appropriated into trading strategies, and financial firms have made a habit of luring experts in these fields into their fold. But that wasn't necessary for commodity trading advisory firm J E Moody & Co. because the company's founder already had a handle on those academic areas.

John Moody posseses a rare combination of theoretical expertise and hands-on financial experience that gradually led him from the halls of academia to a full-time focus on asset management. That career shift certainly has paid dividends -- his quantitative fund, the JEM Commodity Relative Value Program, boasts a compound annual return since inception of 35.7 percent (through October 2007), with assets under management already north of $42 million.

Moody received a B.A. in physics from the University of Chicago and and Ph.D. in physics from Princeton before serving as a faculty member in the computer science department at Yale. He then returned to his roots in the Pacific Northwest, where he served as a professor in computer science at the Oregon Graduate Institute (OGI). In 1996, he founded the computational finance program at OGI, for which he served as director until 2003. Around that time, he says, his sideline in trading began to play a greater role in his life.

"While I was at Yale, I did some consulting for JPMorgan Securities, and over the years I did projects for some major investment banks and hedge funds," Moody relates. "In 2001, I started a small asset management business and began trading clients' funds. That reached the point where, in September 2003, I took a leave of absence from my full-time academic work -- in order to be successful in asset management, you have to devote yourself to it full time."

After several years of development work, Moody launched his commodity fund to external investment in May 2006. However, Moody still retains a part-time academic position at the International Computer Science Institute in Berkeley, Calif., and his strong ties to academia remain a primary source of talent for his firm.

"I've hired a couple of my former top students as traders/quants -- one Ph.D. student, and another who received his master's in computational finance and previously worked in high tech," Moody says. "I've also hired several grad student interns to help out with research."

Moody overseas his firm's research and trading operations. The core team is supported by several back-office and administrative staff plus consultants who help with such areas as business development.

Not surprisingly, given Moody's background, the firm has developed all of its technology in-house. J E Moody clears through Calyon, and its executing brokers are Calyon, Lehman Brothers and Fimat.

According to Moody, the firm's flagship trading program is a systematic, quantitative, relative-value strategy covering the five major commodities sectors: energies, metals, grains, livestock and softs. Trades include long and short positions in futures and futures options, he says.

What makes J E Moody's strategy distinct is that it brings a quantitative approach to commodities that is much more common in sectors such as equity statistical arbitrage or convertible bond arbitrage. "I've been told by numerous investors that we are the only systematic, diversified, relative-value offering in the commodities space," Moody notes. "There are discretionary traders that focus on sectors like grains or energies, but no one else has a diversified, pure-play systematic approach."

Moody says his immediate goal is to continue growing the business and add to the firm's staff, particularly in the research area. Longer term, he has his sights set on the industry's superstars. "Our goal is to be the next Renaissance, Citadel or DE Shaw," Moody comments.

Clearly, Moody's ambition is no less formidable than his academic resume.