Accessing commodities as an asset class: the rise of enhanced index products

Fri Mar 26, 2010



Recognising the attractions of commodities as an asset class is one thing; identifying and implementing the optimum way of accessing commodities is quite another. That is because the most obvious difference between commodities and financial assets is that it is highly unusual for an investor to hold commodities in their physical form. Unusual but not impossible.

One London-based global commodity specialist, Armajaro, has a private equity fund on its to-do list, which will leverage its expertise in agricultural products and emerging markets to invest in farms. Others can be expected to explore similar strategies if the long arm of regulation imposes constraints on investors' exposure to futures markets, as a number of sabre-rattling politicians in the US are proposing.

With physical holdings generally impractical, conventional wisdom used to be that one of the most convenient and liquid methods of gaining long or (more recently) short exposure to commodity markets was...

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