Australia is behind the times when it comes to including commodities in balanced investment portfolios, according to new research from Macquarie Bank.
Macquarie released the CSL Commodities Fund in March this year and is currently marketing it to financial planners. Craig Swanger, division director at Macquarie Adviser Services, said research undertaken by the bank showed adding commodities to a balanced portfolio could improve returns and reduce risk. “Many of the world’s leading investors have long sought out alternative assets, such as commodities, but the bulk of the Australian investment industry remains stuck in the twentieth century when it comes to asset allocation,’’ Swanger said. He said data going back to December 1993 suggested investors could not get the same diversification benefits from resource stocks as from holding the underlying commodity. “The [research] shows that Australian investors using resource stocks such as BHP and RIO as a proxy for a commodity exposure are getting more of an equities market exposure than commodities as the correlation between the resource stocks and commodity prices is weak at best,” Swanger said. He said there was no evidence that hedge funds were causing a speculative bubble of commodities prices. “Some investors have implied the rapid rise in investors’ positions in commodities is a major contributor to the boom itself. However, commodity prices, like any other market price, will be driven by investors only if they are holding net long positions.” However, a recent report by Legg Mason Capital CEO in the US, Bill Miller, has questioned the swing to commodities investing (see this week’s I&T analysis piece).
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