Commodities have long been viewed as the poor cousin in the investment universe, and often for good reason. Unlike equities, commodities do not offer a so-called market beta that drifts higher over time in line with economic activity. In contrast, they present a collection of unique price returns that reflect the underlying supply and demand dynamics of physical assets that serve as the building blocks of the global economy.
In this paper, we take a new look at commodities as an asset class and at its uses in a portfolio, which historically have been diversification and inflation protection. We also analyze different commodity beta allocations. Finally, we identify alternative investment uses of commodities, including as building blocks to express particular investment themes, as tactical trading tools, and as a component of a multi-asset risk premia allocation.