Why we are slowly going back into commodities


By Jade Fu, investment manager at Heartwood Investment Management

Across our multi-asset class portfolios, we have not held any direct commodity exposure for more than two years. That turned out to be a good decision, given the huge collapse in the oil price and steep declines in other parts of the commodity complex over the last few months.

We continue to believe that the fundamentals remain weak for the commodities asset class, principally due to the supply and demand imbalance. Global demand for commodities has been growing but at a slower pace due to the slowdown in emerging markets. Meanwhile, supply for various commodities has grown faster, helped by the shale gas revolution, favourable weather for crop productions, and higher metals outputs in the US and China.