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Commodities

Commodities are any natural resource that is sold and traded. They are generally raw materials that are eventually used to produce other goods, such as crude oil, precious metals and agricultural products such as wheat and corn.
 
There are a number of ways to invest in commodities, including purchasing and physically owning the commodity, investing in shares of commodity producing companies, or holding futures contracts that are linked to the commodity. 
 
Commodities offer diversification benefits because their returns have historically had low or negative correlations with the returns of other types of securities. However, commodities are considered a riskier type of investment relative to traditional asset classes, with potentially large wide price fluctuations based on seasonal and cyclical factors. The main benefit of investing in commodities is as a part of a large and diversified portfolio that also includes other forms of investment.

Commodities provides:

  • Portfolio diversification benefits
  • Low correlation with other asset classes
  • Potential for capital growth
  • Protection against inflation

 

Philosophy and process

Investment philosophy

Investment philosophy

The commodities strategy seeks to achieve its investment objective by investing in commodity-linked derivative instruments. Rather than invest directly in physical commodities, an enhanced index strategy is employed to take advantage of market inefficiencies in the pricing structure of commodity futures.

Investment process

Investment process

Our commodities exposure is managed using an excess return swap. [A swap is a derivative contract through which two parties exchange financial instruments.] The excess return swap exchanges the difference between the commodity index total return and the return on US cash. Excess return swaps allow the party receiving the excess return to gain exposure and benefit from the underlying asset without actually having to own it. This means the Commodities Fund gets the benefit of an exposure to commodities with a minimal cash outlay.

Investment team

Investment team

The commodities exposure is managed by AMP Capital’s specialist Multi-Asset investment team.

Why invest with us?

Simple way of accessing commodities

Simple way of accessing commodities

Our commodities exposure uses an enhanced index investment strategy. The selection and weighting of commodities in the index are typically reviewed annually, or when there is a major change in an industry or significant change in usage of any given commodity. 

Diversification

Diversification

The commodities investment strategy is designed for investors who are using commodities as a risk diversification tool. Commodities can also act as a hedge against inflation.

Global reach

Global reach

Provides access to global investment opportunities using derivatives to gain commodities exposure.

Investment options

AMP Capital Commodities Fund

Investing in a commodities fund provides access to a broad basket of global commodities. Through the use of financial derivatives, investors gain exposure to and benefit from investment in the underlying commodities.