Time to buy commodities? Maybe, but not the old ways

Crazy or brave? That might be the most logical thought if anybody told you now was a good time to invest in commodities, given the sharp declines in the main indexes in the past few months. But that’s exactly what the overwhelming majority of fund managers and bankers were advocating at last week’s World Commodities Week conference in London.

The fund managers and bankers do have more than just blind optimism (and a desire for fresh funds to manage), and can point to a raft of reasons why they believe prices are near a bottom.

Other than a gut feel that prices have fallen enough, the most cited argument at the conference was that the so-called commodity supercycle remains in place, and the long-term growth case remains compelling even if the market is currently in a bear phase.


For portfolio investors, commodities were touted as still offering diversification and insurance against inflation. But what is clear is that commodity investment, if it is going to be successful, is going to become increasingly specialised and active.

Passive strategies and traditional index-based products are unlikely to be able to deliver returns high enough to make them compelling when viewed against alternative assets classes.