”After several tough years, investors are once again starting to warm to commodities. That is the view of one of the sector’s most successful hedge fund managers.
According to Pierre Andurand, “smart investors” are growing concerned about their exposure to equities and are looking to place contrarian bets in other asset classes such as commodities.
This follows a strong start to the year on commodity markets, with the Dow Jones UBS commodity index, for example, 9.4 per cent higher, compared with a 1.8 per cent gain for the S&P 500.
Analysts at Citi reckon investors are starting to take commodities seriously as a portfolio diversification tool because for the first time in many years raw materials are not moving in lock-step with either equities or the US dollar.
Indeed, the correlation between returns from commodities, equities and bonds, which were unusually high after the global financial crisis in 2008, has dropped sharply over the past year. This is helping fundamentals to reassert themselves with supply and demand balances determining the winners and losers in commodities.”