| Commodities: To peak or not to peak, that is not the question |
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| 19/02/2006 | |
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Investors should not worry too much about the end of the bullish run in commodities, according to Credit Suisse Asset Management. "We believe the question of whether commodities have had their day in the sun is secondary. More important, in our view, is that diversification is always in season and commodities diversify a portfolio more than any other asset class", says Terry Mellish, director, UK institutional sales and relationship management at Credit Suisse AM. He says that investors exercising a diversification discipline by investing in commodities should be protected against a turnaround. "The lack of correlation between the component sectors of a commodities index creates a happy circumstance in the optimal strategic solution (from a diversification perspective) and can also be the most efficient and lowest cost solution in which to invest." Back to stay Commodities, after being shunned for years, are definitely back in the sights of investors eager for diversification and for protection against inflation, which they both provide. Passive funds, as well as the commodity index market, which is estimated anywhere between $30bn and $40bn by Société Générale Corporate and Investment Bank, have provided a ready solution for many investors looking to commodities as they give exposure to a broad range of such assets. Other funds, such as Credit Suisse AM are Nova Commodity Plus Fund, are actively managed, but also seek to lower the overall volatility by investing in various commodities. Although commodities performed rather poorly in 2005, as demonstrated by the negative commodity returns in the last quarter of 2005 at Dutch pension fund PGGM and Metalektro (-13.8% and -10.6 respectively), this hasn't stopped the BT pension scheme committing £1bn to a passive commodity fund run by Hermes Pensions Management. The fund tracks the 24 commodities included in the Goldman Sachs Commodities Index. Another scheme, the pension fund of Dutch firm Horeca & Catering, said that it had awarded a €100m passive equity mandate towards the end of December. J.L. |
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