The commodities wheel of fortune

In the current commodities bull run, retail investors have had access to a huge range of products to gain exposure. As a result, investment is shifting from broad-based diversification to increasingly sophisticated strategies. But will greater risk appetites leave investors at the mercy of volatile markets and speculators?

Three years ago, a commodity investment meant prudent investors placing a perfunctory 3% slice of broad-based index exposure in their portfolios. Attention focused on the active management of the other usual asset classes like equities and credit, with few second thoughts to what was principally a hedge. But now that the boom in commodities has firmly fixed itself in the investor mindset, commodities investment has undergone a permanent shift. In contrast to the upturns of the twentieth century