PA ANALYSIS: The commodity bull case revisited

Added 8th August 2016

Investors have again started looking at increasing their exposure to commodities this year. However, the asset class has delivered mixed results so far.

PA ANALYSIS: The commodity bull case revisited

Expert Investor’s investment sentiment data suggest more and more fund buyers are seeking to increase their exposure to commodities, with oil and gold being the most obvious targets. Returns from commodities have been wildly divergent however. While the gold price has surged to a two-year high, the crude price has dropped by some 15% since July 1st. 

One of these commodity bulls was Tim Peeters, head of securities portfolios at Portolani in Antwerp, Belgium. Back in February, with the oil price at $30 and the Bloomberg Commodity Index at a record low, he made a compelling case for increasing allocation to commodities. His bet played out even better than expected, at least until oil’s recent setback.

Dim crude, shining gold 

“When oil rose above $45 a barrel, I realised this was going too fast, because it takes more time to restore the balance between supply and demand than markets were thinking back then,” Peeters says. So he rushed to make sure the managers of the funds he had bought into to profit from rising commodity prices had been reducing their exposure again.

Luckily for him, they had in most cases. “One of the funds I invest in, the AzValor Internacional fund [set up in October last year by members of Francisco Parames’s former team at Bestinver], reduced their exposure to materials and energy from 43% to 15% last month.”  

That the commodities complex is currently a double-edged sword is perhaps best characterised by the distinct returns generated by two Blackrock funds over the past year. Its World Gold Fund has made a one-year return in excess of 100% (with all returns generated in the past six months). The Blackrock World Energy Fund, which invests in companies active in the oil and gas sector, posted a return of -5.9% over the same period.


Peeters’ guess, however, is that investors who remained on the sidelines during the oil rally earlier this year will get a new chance. “I still think oil will bounce back to $60,” he says. This is also what futures markets say, though they have been constantly adjusting their projections downwards. The graph to the left suggests that it might well take Brent two years to break through the 50-dollar level again. The chance that oil will fall back to the levels seen at the start of the year, on the other hand, looks rather small.


Kames Income Hub


Vincent McEntegart, manager of the Kames Diversified Monthly Income Fund, explains how he aims to deliver a stable and sustainable income of 5% p.a.*, paid monthly, by investing in a range of asset classes

Square Mile Research

Matthews Asia Funds Asia Dividend
Matthews Asia Funds Asia Dividend...

Talking Factsheets is a video service for users...

Visitor's Comments Add your comment

Add Your Comment

We won't publish your address

About Author

Tjibbe Hoekstra

Senior Reporter

Tjibbe joined Expert Investor as a senior reporter in March 2014. Before moving to London he worked as a financial news reporter for various news outlets in Amsterdam, including Reuters and ANP, the main news agency in the Netherlands. He also worked for Fondsnieuws, a website and magazine for finance professionals in the Netherlands. Tjibbe holds a MSc in Public Administration and a post-graduate diploma in Journalism.



Investment Strategy




PA Channel Island 2016
PA Channel Island 2016

8th November 2016
The Royal Yacht, Jersey


17th November 2016
The Andaz

PA Emerging Markets 2016
PA Emerging Markets 2016

1st December 2016
The Mayfair, London

Sponsored Content

Investment Strategy