Indices offer diversification for portfolios

As an asset class, commodities demonstrate unique characteristics that make them useful for portfolio diversification. Often seen as too risky for investors, the use of an index gives exposure and diversity with a lower risk element. Jamie Wynn-Williams discusses

Commodities have not always been a fashionable asset class. Uncorrelated to other asset classes, commodities can be unpredictable in nature and hard to trade as pure futures contracts. Certainly the volatile ups and downs in recent months of such mainstays as oil, gold and soft commodities has further enforced the danger of exposure to this asset class without the needed expertise.

The introduction of commodity indices in the 1980s gave investors the chance to exploit the commodities markets in a