Commodities
Enhancing risk-adjusted returns
Commodities can help manage unexpected inflation risk and generate returns that tend to be uncorrelated with either stocks or bonds.
Commodities offer a pattern of correlation and return that can be distinct from other asset classes, in particular stocks or bonds. As such, they have the potential to diversify and enhance the risk-adjusted returns of a traditional portfolio.
Exposure to commodities can also help portfolios manage inflation risk. One of the most compelling advantages that commodities offer is their differentiated return characteristics during periods of unexpected inflation risk.
Commodities have historically helped to diversify business cycle risk as the asset class tends to behave differently compared to equities during the various phases, such as during late-stage expansion or early-stage contraction.
Our risk-managed approach seeks to maintain the diversification properties of the benchmark, while managing collateral conservatively. We do not add significant duration or credit risk from the cash portion. Our expertise, stability, and experience allow us to provide consistent, transparent, and efficient access to the commodities marketplace.
Investment strategies
Enhanced Index
The Total Commodity Return Strategy seeks to outperform the return of a commodities index, such as the Bloomberg Commodity Index Total Return or the S&P GSCI Total Return Index, using both a quantitative and qualitative commodity research process. Commodity index total returns are achieved through:
- Spot return: price return on specified commodity futures contracts
- Roll yield: impact due to migration of futures positions from near to far contracts
- Collateral yield: return earned on collateral for the futures
Dynamic Alpha Strategy
The Credit Suisse Dynamic Alpha Commodity Strategy aims to achieve a high absolute return by investing in commodity markets.
- Low correlation with commodities, equities, and fixed-income beta
- Relative value approach to exploit pricing anomalies through fundamental and quantitative analysis
- Multi-sector approach that includes energy, agriculture, livestock, and metals
- Exposure through listed and OTC futures, swaps, and options
Opportunities and risks
Reasons to invest
- Commodities markets and returns are often uncorrelated with other asset classes and provide diversification benefits.
- Commodity investments can act as an inflation hedge.
- Credit Suisse provides access to deep expertise and sophisticated solutions in this space.
Potential risks
- Speculative nature of commodities investments. Investing in commodities is speculative and involves a high degree of risk. There is no assurance that technical and risk management techniques, as well as the investment decisions made by the investment manager, will not expose investors to risk of significant losses.
- Market-driven risk could negatively affect the value of a particular investment.
- Credit risk may occur if a counterparty defaults or is unable to honor a financial obligation.
- Commodity-linked derivatives may be subject to greater volatility than traditional securities.