Is it Time for Commodities?
We have a process. All we need is the upswing.
We know how to incorporate commodities into our asset allocation process. Over the last 25 years as a whole, our process would have generated significant outperformance on an absolute and risk-adjusted basis. This is achieved by systematically managing exposure to a limited number of commodities: oil, gold and copper only, and by actively managing a small number of other assets, spread across equities and fixed income. Passive exposures don’t work as well and too many assets create unnecessary and counter-productive complexity. The problem with including commodities is that US exceptionalism in equities, currencies and fixed income has made this strategy unattractive since 2010. If you think that this regime may be ending, it may be time to take another look at commodities.