Lack of alternative drives investors to commodities
Investors are investing too much into the commodities sector because of the lack of an alternative, when they should be lowering their exposure instead, according to Platypus Asset Management chief investment officer Don Williams.
If investors have been long over the last five years, they should be selling half of their position, Williams said.
The lack of alternative investments was driving people to increase their exposure to commodities, Williams said.
“You’re not going to get a great return out of owning a 10-year bond, yielding 3 per cent, and commodities are inversely correlated to the US dollar so it gives you a hedge,” he said.
“It seems to me that over the last four or five years, more and more professional investors are investing in commodities as an asset class, and in our view, most of them are at or around their likely ceiling,” he said.
There isn’t a lot of upside in commodities over the next five years, except for energy stocks; and with the possible exception of nickel, most of the base metals won’t be able to stay up around current prices, Williams said.
Supply response to demand was also a lot faster and would come down over the next year, he added.
Recommended for you
Australian fund managers are actively seeking to launch Cayman versions of their funds to attract offshore flows, with Regal Partners set to launch its latest offering this month.
As private markets gain traction in Australia but only a limited pool of talent is available, three recruiters explore whether fund managers should consider looking overseas to find top talent.
With an explosion of private credit managers appearing in the market, two alternatives experts believe a consolidation is needed to maintain the quality of the sector.
Bentham Asset Management has become the latest fund manager to expand its distribution team as it reports increased interest in its credit strategies.
