The world has changed since 2020. Quantitative Easing (“QE”) is over, interest rates are no longer pegged at zero, and inflation has normalized closer to the long-term average 3.5% (US CPI) since 1948.

How does one construct a portfolio that can deliver in this environment?

This month we provide a glimpse into the asset class allocation of some of the largest North American pensions and endowments. As demonstrated below, many large institutional investors have 5-10% allocations to commodities and/or Commodity Trading Advisors (CTAs) in the managed futures sector. Read more.

Renewed commodity strength was seen in July many sectors such as agricultural commodities. Auspice expects food prices to follow agricultural prices back up, putting a floor and likely reversal in the recently softening of inflation metrics in some countries. Read more.

In the Auspice May blog “Agflation” we highlighted a number of commodity food markets breaking out to 10+ year highs. Agricultural commodities continued upwards in June making 12 months highs, and the recent divergence and softening in both food prices is likely temporary in our opinion. Read More.

In last month's blog “Agflation” we highlighted a number of commodity staples markets breaking out to 10+ year highs. At the same time, in the last twelve months (through May 31st, 2023), commodities have been in a retracement after a strong two-year rally. The long only commodity benchmark indexes BCOM & GSCI have experienced 28% and 31% peak to trough drawdowns respectively (the tactical Auspice Broad Commodity Index has mitigated most of this drawdown and is down just 5% over this one-year period). 

We are bullish long term on commodities for many reasons (more here and here). That being said, like all markets, commodities in particular, do not go straight up. Risk management is critical. Importantly, there is a marked difference between resource equities, traditional long-only commodities, and tactical commodity strategies such as those Auspice offers. Read More.

Think inflation is going to continue downwards? Some “food” for thought, in May 2023:

• Sugar made ten-year highs.

• Robusta coffee futures reached 12-year highs.

• Cattle futures made all time record highs.

• Orange Juice futures made all time record highs.

Read More.

On the back of the US banking crisis which created a rapid shift in fixed income markets, the benchmark CTA indexes (BTOP50 and SG CTA) dropped 5 to 6.5% and experienced 7 to 9% peak to trough drawdowns. Some of the most popular CTA ETFs, typically with more concentrated positioning, were down twice as much from peak to trough. Auspice Diversified Trust, our flagship CTA fund, delivered a slight positive result in March, up 0.34%. Read More.

Auspice Diversified Trust (ADT) and the Auspice One Fund Trust (AOFT) are now available to all Canadian investors as National Instrument 81-102 (“NI 81-102”) alternative mutual funds “liquid alternatives” (no longer available to institutional and accredited investors only), now public mutual funds with daily liquidity. Read more.

In January one chart in particular grabbed our attention, and we can’t understate its significance. The surge in Indian capex and planned infrastructure spending – on the back of the noted decade of underinvestment in the resource sector, may supersede the green transition as the biggest driver of a commodity supercycle. After a four-year period of flat to moderate capex growth, India is set to double its 2023 capex from 2020 levels. Read more.

Along with the structural set-up we have previously described, we believe there is a substantial additional important factor, one that could dwarf all the others, that our recent research has uncovered. India may create a new emerging demand shock that we believe is already well underway. While China has the world's largest population at 1.426 billion, India at 1.417 billion is set to claim this title in 2023. India is already the fastest-growing economy in the world, having clocked 5.5% average gross domestic product growth over the past decade. But the growing middle class is the key. Read more.

This month’s blog is brief. From the largest pensions to the most traditional bank platforms, investors are increasingly embracing alternative investments. We believe two reasons often come to the forefront: Diversification and Potential Returns Enhancement. If Diversification and returns enhancement indeed are the motivations to embrace alternatives, we may recommend investors think hard about what they're invested in, how much, and why. Read More.

As the Auspice Broad Commodity Index (underlying strategy to NYSE “COM” and TSX “CCOM” ETFs) went to a 100% cash position in October we performed some analysis. To some, buying a “commodity” ETF that is currently 100% cash seems counterintuitive. Historically this has only occurred three times since 2000. In September 2014 this occurred and there was significant outperformance vs long only commodity benchmarks (2-year 43.78% cumulative outperformance ABCERI vs S&P GSCI ER). In September 2008 and March 2020, the performance following was amongst the strongest performing periods. Read more.

As we know, there are many options to diversify beyond stocks and bonds – something more capable, larger institutional investors have long embraced. With Quantitative Easing (QE) over and inflation sinking it, most investors are re-evaluating portfolios if not already done.

Some pensions like Ontario Teachers’ (OTPP) and Hawaii (HIERS) are ahead of the game and have announced exceptional results, delivering 1.2% and -1.7% in the first half performance, far superior to the traditional 60/40 portfolio result of -16.3%.

What are the pensions and endowments doing exactly? How are they performing? This month we look at five of the best. Read More.

Commodities outperformed equities for almost 40 years prior to the Global Financial Crisis. Given the continued deterioration in 2022 commodity capex and supply alongside further drivers, we are likely in the early innings of an emerging commodity supercycle. See this month’s blog for more.

We’ve seen several articles about “return stacking” over the past couple years - an approach to alternative investing long embraced by institutional investors that’s increasingly available to retail investors.

Indeed, at Auspice we have long offered (and advocated) for this approach with institutional investors, and in 2020 we made this strategy available to all investors through the Auspice One Fund.

What exactly is return stacking, why should you consider it, where does it fit within a portfolio, and how has it performed in the recent environment? This month’s blog provides an overview. Read More.

If you have chatted to us or read any of our material over the last two years you understand we have been very bullish on commodities. Across the board, from unprecedented fundamental supply shortages to long-term technical indicators – we firmly believe we are in the early innings of a commodity supercycle (see May and March blogs for more). You simply cannot fix the supply issues overnight and raising rates does not change that.

That said, where there are significant rewards – the benchmark GSCI TR has now outperformed global equities since 1970 (see Appendix A) – there is also significant risk. Read more.

We can’t change the past, but we can plan for the future. As such, lets explore three things: 1) The relationship between commodities, currencies and inflation, 2) Central bank solutions, 3) Are you too late? Read more.

For retail investors in particular it has been a tremendous, unprecedented period of returns. Not only has the 60/40 portfolio thrived, but so too has real estate. If we look at various regimes, or themes that characterized 3-5 year periods, the current inflationary regime that began in 2020 marks the first departure from consistent stock/bonds/real estate returns since the Global Financial Crisis (GFC). Read More.

As depicted in Chart 2, from 1970 to 2007 the benchmark GSCI Commodity Index outperformed both the SP500 and MSCI World. With equities valuations at historical highs and commodity supply at record lows (see last month’s blog) we believe commodity outperformance vs equities will be even more significant this decade, maybe even a generational opportunity, eclipsing the outperformance experienced 1970 – 2010. Read More.

February was volatile and any sanctions or coordinated responses may pose long term market ramifications. However, the Russian invasion of Ukraine mostly accentuated underlying fundamental themes already in motion:

1. We’re in a structural commodity deficit that may affect markets broadly for years.

2. Gains in commodities versus weakness in equities suggests cyclical rotation is underway.

Read More.

April 2021 was the first time in the last decade inflation (US CPI) came in significantly above the 1-3% “normal” rate we became accustomed to aligning with the FED 2% target (see Chart 1 below). Inflation is currently at its highest levels since the 1980’s, CPI YoY recently reported at 7%. Since the April 2021 inflation surge, the most inflationary period of the last decade, Bitcoin is down 34.8%.

Read More.