After three years of negative sentiment and capital outflows, commodities appear to be coming back. The Financial Times published an article yesterday highlighting the turning sentiment in commodities after $50bn of net redemptions in 2013. Some analysts are speculating that the renewed interest in commodities is related to their uncorrelated returns, making them popular as a portfolio diversifier. However, more than anything commodities are becoming attractive because prices are rising. After falling close to 30% since 2011, the CRB index is up more than 15% since January and has broken through several important trend lines.
Is this the start of a new trend? We beleive that in an Endowment styled portfolio an allocation to Commodities improves risk-adjusted returns.
(Source: GBI, etc.)