New asset class a product of its time

Adelaide based Global Commodity Investments (GCI) has launched what it says is Australia’s first commodity investment product.

Adelaide based Global Commodity Investments (GCI) has launched what it says is Australia’s first commodity investment product.

The product, devised over two years, is a low volatility investment portfolio which invests in commodities and fixed interest.

GCI director Greg Smith says commodities are a diversification tool for financial advisers. He says financial advisers generally allocate equities as the greatest weighting in a client’s investment portfolio, however, there soon could be a shift in direction, especially given the current volatility in share markets around the world.

“In a bearish market the answer is global commodities. Industry and consumers will always need them, even in a falling stock market,” he says.

Smith says the product has lower volarility than equities but slightly higher than bonds, and has equity type returns. It contains 17 commodities measured by the global commodity index.

“We have evaluated each commodity and broken them down into four catalogues — energy, metals, grains and miscellaneous agriculture,” Smith says.

GCI has enlisted the services of the Commonwealth Bank of Australia (CBA) to manage its futures account. Smith says he did not choose CBA over other institu-tions, it all came down to association with Cargill Investor Services, a storage trading house.

“Cargill has had an association lasting nearly eight years with the CBA,” he says.

The minimum investment sum for this product is $5000, with the maximum sum for larger wholesale managements set at $500 million.

Entry fees are a maximum of 3 per cent and a trail for advisers is then negotiated through administrators.

Smith says the company has about $6 million under management - $2 million in Australia and $4 million from New Zealand.

“Shares will be issued at the end of each month and investors can redeem their shares at each month at no cost,” he says.

Smith says the company is not listed at this stage due to fierce competition from other investment companies. However, further down the track there might be a public listing.