Thanks to nearly every essential raw material facing low inventories, investors have become increasingly bullish on commodities. Considering that commodities has been the best-performing major asset class for the past two years, the optimism is merited.
Another tailwind for commodities is that the global economy is turning out to be stronger than many investors and analysts expected.
“China’s reopening and signs of stronger government support for its beleaguered property market are key factors driving the metals rally,” according to the Wall Street Journal. “But data from the U.S. and Europe hasn’t disappointed either. U.S. inflation remains high but is clearly trending downward. The mild winter in Europe has limited damage from the increase in natural-gas prices.”
Plus, the prices for raw materials such as metals and grains will likely wind up higher at the end of 2023 than they are now. Some metals, such as gold, are already doing quite well at the start of the year.
“Gold prices recently hit a nine-month high in mid-January,” said Roxanna Islam, associate director of research at VettaFi. “Many investors are still seeking safety in gold as markets remain volatile and some recessionary fears remain.”
Investors wanting active exposure to commodities (including gold) while sentiment is sky-high may want to consider the Neuberger Berman Commodity Strategy ETF (NBCM). Converted into an ETF in October, NBCM invests in commodity-linked derivatives with an active risk-balanced, diversified approach that seeks to minimize the effects of market volatility.
Tactical exposure adjustments expand potential alpha sources by considering top-down macro variables among commodity sectors, along with individual commodity outlooks to take advantage of short- and long-term opportunities.
The fully transparent ETF’s fixed income holdings are actively managed and designed to preserve capital and serve as collateral for the ETF’s derivative positions while also seeking to generate additional yield. The fund will continue to be managed by Hakan Kaya, David Wan, and Michael Foster.
“The firm continually assesses where our investment expertise intersects with client demand and preference for an ETF vehicle,” said Scott Kilgallen, head of North America intermediary client coverage, in a news release announcing the ETF’s launch. “Commodities can enhance strategic asset allocation by providing diversification benefits while potentially mitigating the effects of inflation.”
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