Recent Weakness May Provide an Attractive Entry Point for Investors Looking at Commodities

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Feb 09, 2010, 11:49 ET

NEW YORK, Feb. 9 /PRNewswire-FirstCall/ -- Recent heightened levels of uncertainty have highlighted the need for diversification and may continue to drive investors in search of alternative asset classes, including commodities.

Andrew Karsh, Co-Lead Portfolio Manager for the Credit Suisse Total Commodity Return Strategy said, "Over the last couple of years, we have seen macro factors dominate across many asset classes, including commodities. As market uncertainty declines, we expect commodity-specific factors to re-emerge as a driving factor of prices which should cause inter-commodity correlations to decrease while simultaneously reducing correlations with other asset classes such as equities and fixed income."

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Co-Lead Portfolio Manager, Christopher Burton, added, "Commodities have tended to react to the same sets of risk factors differently than other asset classes. For example, while unexpected inflation can destroy bond returns and potentially show that equities are no place to hide, it may drive commodity prices significantly higher. While inflation expectations continue to appear to be anchored at unusually low levels near term, the specter of higher inflation lurks in the distance. From a strategic standpoint, we continue to believe commodities play an important role in investor portfolios throughout market cycles."

The Dow Jones-UBS Commodity Index Total Return declined by 7.28% in January. China's announcement of its plans to tighten bank lending across the economy caused declines in many of the metals and energy commodities, with Zinc as the worst performer in January, down -17.99%. Lead and Oil were also at the bottom of the chart, while Nickel stayed fairly flat as labor disputes maintained prices relative to other metals. Agriculture experienced the greatest loss as a result of Corn and Soybean prices hurt by the U.S. Department of Agriculture's production estimates. Sugar, the only commodity with gains in January, continued its positive streak from December and gained 10.95% due to lower than expected supplies.

The Credit Suisse Total Commodity Return Strategy group periodically produces updates on relevant industry topics. For a copy of their latest whitepaper, "Capitalizing on any Curve: Clarifying Misconceptions About Commodity Indexing", please email [email protected].

About the Credit Suisse Total Commodity Return Strategy

Credit Suisse's Total Commodity Return Strategy has been managed for fourteen years and seeks to outperform the return of a commodities index, such as the Dow Jones–UBS Commodity Index Total Return or the S&P GSCI Total Return Index, using a quantitative 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; and
Collateral Yield: return earned on collateral for the futures.

About the Portfolio Managers

Christopher Burton, CFA, and Andrew Karsh are Co-Lead Portfolio Managers of the Credit Suisse Total Commodity Return Strategy. As of January 31, 2010 the team managed approximately USD 4.5 billion in assets globally.

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SOURCE Credit Suisse AG