Commodities Diversified Strategy
Successful diversification in commodities markets
Commodities do well in the mid-to-late stages of an economic cycle as demand is usually high at such points in time. Also, inflation hedging and portfolio diversification are increasingly important goals and commodities can provide both as they are real assets with low correlations to other asset classes. Thus, investors are increasingly interested in commodities solutions.
J. Safra Sarasin Asset Management can offer investors a time-tested solution for investing in commodities. With a live track record of over 12 years of outperforming its benchmark, the strategy is the core of our commodities platform. It aims to provide a diversified exposure to commodities markets and to generate outperformance through a combination of systematic and discretionary portfolio management.
Commodity selection is done systematically as the strategy equally-weights the different commodity sectors of Energy, Metals and Agriculture, as well as the individual commodities within a sector, which can lead to a well-diversified portfolio. In addition, commodities are selected based on their correlation with each other in order to have the lowest possible interdependencies and also harvest a rebalancing premium. The term structure implementation is done actively and can generate additional returns.
Historically, both the systematic and the discretionary elements of the strategy have contributed to its outperformance and we are confident in its future, as the portfolio manager Martin Baumgartner notes:
“In spite of the multitude of developments in commodities markets, they actually haven’t changed a lot; they are still volatile, tend to mean revert, and show low correlations to each other. This is also the main reason why we still have the same investment process in place since we first started, because it is designed to benefit from these rather timeless characteristics of commodities.”
The portfolio managers, Martin Baumgartner and Dominique Ehrbar, have designed the strategy and have been managing it successfully for over 12 years.
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