Many people refer to stocks of companies that produce commodities as commodity investments. This is incorrect. They are equities and thus have a high correlation to the broad equity market. Just like tech company stocks and health company stocks are equities. The difference is simple - you can invest directly in commodities. And if you think an alternative like private equity isn’t equity, I have some tropical ocean front property in Calgary that you might be interested in.
There is another difference - commodities are the raw materials for making other things. They are important building blocks. As such, they can be used as a hedge, for pure price risk management or inflation protection. We will always need commodities- always being a long time from current times anyway. At least until Elon the third finds a way to do this in outer space.
The best part? Commodities are not correlated to equities or fixed income over the long term. They are valuable to a portfolio because of their low correlation. Moreover, if invested in tactically, as opposed to a long only index approach, the result can have far less volatility, less downside risk and potential for gains when other assets cannot provide this opportunity.
The chart at right depicts the recent performance of the Auspice Broad Commodity tactical program (ABCERI) versus a long only commodity benchmark in Bloomberg Commodity (BCOM) along with the S&P500 and the TSX Capped Energy Index (resource equity). In addition to being the only positive return since December 1ˢᵗ 2018, the ABCERI has little drawdown (< 1%) and far lower volatility.
Can we convince you that a commodity investment might be more valuable to a portfolio than stocks in the resource equity sector?
We aim to try - please read the linked Research here. For more about the Auspice CTA and commodity strategies and the potential portfolio benefits, please give us a call.
IMPORTANT DISCLAIMERS AND NOTES
Futures trading is speculative and is not suitable for all customers. Past results is not necessarily indicative of future results. This document is for information purposes only and should not be construed as an offer, recommendation or solicitation to conclude a transaction and should not be treated as giving investment advice. Auspice Capital Advisors Ltd. makes no representation or warranty relating to any information herein, which is derived from independent sources. No securities regulatory authority has expressed an opinion about the securities offered herein and it is an offence to claim otherwise.
For U.S. investors, any reference to the Auspice Diversified Strategy or Program, “ADP”, is only available to Qualified Eligible Persons “QEP’s” as defined by CFTC Regulation 4.7.
For Canadian investors, any reference to the Auspice Diversified Strategy or Program, “ADP”, is only available to “Accredited Investors” as defined by CSA NI 45-106.