Consultants ‘lack house view on commodities’
UK - Consultants need to reach a “house view” on commodities says Barclays Global Investors’ head of commodities strategy.
Benno Meier told IPE that because commodities have not been at the top of consultants’ priority list for years, their attitude to the asset class can be uneven, even in the same consulting firm.
He explained to IPE that generally consultants have formed an opinion on commodities, but they express it as individuals because of a lack of a single firm-wide view.
The general attitude however is changing as pension funds start shopping around for diversification. He was speaking on the sidelines of a commodities conference in London.
Meier added he had observed that some pension funds had showed interest in commodities before their consultants.
But he stressed that more and more firms are embarking on research work. “I take off my hat to consultants,” he said.
In his presentation, Meier commented that the six or so commodity indices could potentially confuse pension funds starting to invest.
He said that the asset class entails relatively high returns and diversification benefits but also volatility. Costs are down due to increased competition and products on offer.
But at the same time, he stressed that commodities
also offer “strong returns during geopolitical or macro-economic shocks” and that the market is liquid and transparent.
Speaking of investors’ worries about commodities’ capacity he said that as long as institutional investors continued to be a small proportion of the market size, there was a case for commodities.
He concluded his presentation likening exclusively equity investments to a fire hazard and commodities exposure with fire insurance.