Commodities: The new UCITS frontier

Mon Aug 22, 2011



UCITS-compliant funds are unable to invest directly in commodities. However, global economic turbulence has resulted in gold reaching historical highs and an increasing interest in the sector which is often seen as an inflation hedge. Joy Dunbar, editor of Absolute UCITS, explains how alternative asset managers are getting commodity exposure using the UCITS wrapper and how funds tackle tracking error.


Global economic meltdowns have often resulted in commodities being considered an attractive investment strategy. After all people will always need soft commodities like coffee, cocoa, sugar, corn, wheat, soya and fruit.

On the other end of the spectrum hard commodities like metals, chemicals and petroleum are also necessary for our day-to-day lives whether it be for travel, components in mobile phones or the materials needed for building homes and skyscrapers.

The spotlight has increased on commodities because of increased fears and volatility in western economies due to te sovereign debt problem in the eurozone as well as the colossal debt crises in the US and other developed economies.

This has been highlighted by investors fleeing to gold - which hit an all-time record high at $1,861 an ounce on 19 August 2011 - in a week when there were fears about the lack of global growth, the economic slowdown and...

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