The Investment Community is Underinvested in Commodities

The slow growth, disinflationary economic environment subsequent to the Global Financial Crisis has left investors under-invested in inflation-sensitive asset classes such as commodities. However, as this Bloomberg article points out, the investment community is beginning to take note.

Commodities provide several notable benefits to portfolios:

  • Should perform well during an inflationary cycle
  • Should perform well during periods of heightened geopolitical tension
  • Provides diversification benefits alongside stock portfolios during all cycles
  • Direct commodity exposure (as opposed to commodity-linked stocks) gives your portfolio exposure to idiosyncratic factors

However, this asset class can be notoriously difficult to access efficiently:

  • Existing strategies are mostly weighted by production (market cap), meaning that hydrocarbons tend to dominate risk and return
  • Many strategies are expensive and provide limited liquidity
  • Most strategies lack a thoughtful framework through which to maximize carry, roll yield and diversification, and are at risk of being exposed to tail risk such as when the front month oil contract traded at negative prices

The Viewpoint Commodity Fund uses the firm's proprietary risk allocation engine to create an efficient, thoughtful, diversified and liquid vehicle to access global commodity markets. We firmly agree with Mr. Bloom's comments in the article, in that there's a huge part of the investment community that is underinvested in commodities.

Viewpoint's world class team employs a highly rigorous research process in the spirit of continuous improvement and investment innovation. At the intersection of data science and finance.

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