Maximum Diversified Commodities

Commodities as an asset class is one of the most reliable inflation hedges. Due to their nature, commodities front run CPI prints as higher consumer prices are often directly caused by increases in commodity prices. Thus, investing in a broad basket of commodities will add protection to an investment portfolio against surprises in higher inflation. The second bias of commodities is its exposure to increasing rate of economic growth. When the economy grows, consumers and companies purchase more goods, leading to an increased demand in commodities, positively impacting their prices. Common commodity indices - Bloomberg Commodity Index (BCOM) and S&P Goldman Sachs Commodity Index (S&P GSCI) provide exposure to a broad basket of commodities, but the methods for weighting their allocations are suboptimal as they are based on global supply rather than taking advantage of the benefits of balanced diversification. Rogers International Commodity Index (RICI) is better as it weights based on demand, but also this is tilted toward single commodity categories. All established commodity indices tend to have heavy exposure to energies, meaning you do not achieve optimal performance from the wide set of commodities included. Based on research from established risk parity asset managers, for example AQR and ReSolve, an optimized and better balanced broad commodity portfolio outperforms concentrated indices measured as absolute returns and with lower volatility. Maximum diversified commodity exposure additionally achieves higher return from a rebalancing premium as the portfolio correlation decreases to a minimum. This Maximum Diversification Commodities Wikifolio certificate provides access to a broad basket of 24 commodities, including EU carbon emission allowances, weighted to achieve lowest possible portfolio correlation (maximum diversification) with monthly rebalancing, concentration constraints on both individual commodities and categories avoiding concentration.