Standard & Poor’s Fund services is assessing pure commodity products as a separate peer group for the first time, assigning four star ratings to three new pure commodity products and withdrawing the rating on another.
A number of new pure commodity products have entered the market, after the strong growth in commodity prices in recent years.
Standard & Poor’s fund analyst Simon Scott said the ratings house now considered pure commodity products separately from both equity-based resources funds and the more diversified commodity trading adviser (CTA) products.
“S&P has a high level of conviction that each of the products’ risk-adjusted returns will exceed relevant investment objectives. However, each product is offering something quite different, and cannot be compared with the other funds side-by-side,” he said.
“These funds obtain exposure through commodity futures and forwards, and do not contain the equity beta that is inherent in resource stocks; therefore, they offer a much clearer exposure to commodities.”
According to Scott, in recent years investors and their financial advisers have become more comfortable with the benefits of adding commodities exposure to a portfolio, but the difficulty lay in determining which commodity benchmark to incorporate.
“This will differ for each investor type according to their current portfolio holdings, as the exposures to some commodity sectors can vary considerably in the different indices and, in some cases, the custom benchmarks may exclude certain commodities altogether,” Scott said.
The three pure commodity products rated four stars include: Ascalon H3 Commodities Fund; CORALS Commodities Fund; and Credit Suisse Enhanced Commodities Fund. CSL Active Commodities Fund was withdrawn.
