Commodities offer alpha win

commodities

Investors are drawn to commodities because historically commodity futures have offered a risk premium similar to that of equities. They have been a great source of portfolio diversification both in normal and in bad times.

However, history also shows that returns from investing passively in commodities over short to medium time frames are unreliable. They occasionally expose the investor to substantial drawdowns (Figure 1).

At present some investors are unwilling to initiate passive investment in