Eugen Weinberg, head of commodity research at Commerzbank, presented the Commerzbank Commodity Strategy fund, to which he is an advisor, to delegates at Investment Europe's recent forum in Lausanne. The markets it invests in typically face demand higher than supply, with China the primary driver.
Eugen Weinberg, head of commodity research at Commerzbank, presented the Commerzbank Commodity Strategy fund, to which he is an advisor, to delegates at Investment Europe’s recent forum in Lausanne. The markets it invests in typically face demand higher than supply, with China the primary driver.
It fuels over 40% of global demand for aluminium, copper, zinc and nickel, and 20% of demand for metals generally.
Weinberg pointed to the expectation central banks would be net buyers of gold this year, only the third year since 1989.
Gold is still near its all-time US-dollar high, and Commerzbank noted “it is still cheap relative to US stocks”.
Oil’s price would also be buoyed by generous social security promises announced recently in major oil producer Saudi Arabia, whose leaders are keen to avert civil unrest prevalent in their region.
Commerzbank noted commodities share prices were often poor proxies for the prices of raw materials,
Gold shares have a 0.3 correlation to gold prices, but a 0.7 correlation to global shares, for example.
In 2008 gold bullion rose, while shares of miners plunged in broad sympathy with other equities.
Platinum rose by about 20% this year to August, whereas miners’ shares have fallen, in some cases by up to 50%, amid severe employment disputes in South Africa, which is the home of 75% of global production.
But commodity spot prices for the physical goods display “historic low correlation with other asset classes, [so] commodities can be an effective diversifier within a portfolio. Regarding both performance and correlation, Commodities are a very heterogeneous asset class.”
Prices of major precious and base metals, and crude oil have all outperformed global and European shares since 2002, but the various prices have diverged from one another.
“The correlations vary and are influenced by several factors, for example macroeconomic changes versus global crises will affect industrial metals and precious metals in different ways . Active management is required not only to try and drive performance, but also to manage the risk relating to the various commodity sectors and individual commodities,” Commerzbank said.
The group’s fund can have between zero and all of its assets in commodities markets. In May it had about 50% exposure, whereas by the end of August it had about 96%.