GCC - Rebalancing Commodities: The Rise Of Diversified Strategies Amid Global Challenges And Market Volatility

2024-05-08 12:40:00 ET

Summary

• Bonds are no longer hedging stocks in multi-asset portfolios the way they used to because of elevated inflation concerns, causing investors to look for alternatives.
• We believe that commodities, being a driver and input to inflation, may be one of the most natural hedges for overall portfolios.
• GCC selects contracts on the futures curve, following a rules-based process, to minimize the implied cost of carry.

By Alejandro Saltiel, CFA, & Luca Berlanda

For more than a decade after oil peaked in 2008, commodities exposures were akin to a dirty word because of poor performance that weighed on portfolios. Oil went negative with the COVID-19 pandemic, furthering pressure on commodity indexes, but inflation became a top-of-mind concern as pandemic relief measures were put in place and the economy reopened. Then Russia invaded Ukraine and sent commodity prices higher....

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