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June 13, 2016 at 05:55 AM
For the first time in years, commodities are doing something they haven’t done in a while: They’re outperforming major asset classes like stocks, bonds and real estate.
After several years of consecutive annual losses for major commodity benchmarks, a turnaround in the beleaguered group appears to be in the works.
Since the start of the year, the Thomson Reuters/CoreCommodity CRB Index (CRY) has climbed 9.5% in value compared to a gain of just 3.6% for the total U.S. stock market (VTI), 4.4% for the total U.S. bond market (BND) and 7% for global real estate equities (REET).
Global commodity prices have been lifted by a rebound in precious metals and energy.
Broad basket commodity mutual funds as a group are ahead by 13.9% year-to-date (YTD), according to Morningstar. The BlackRock Commodity Strategies Inv A (BCSAX), AQR Risk-Balanced Commodities Strategy I (ARCIX) and Credit Suisse Commodity Access Strat A (CRCAX) funds are among the performance leaders in the commodities category so far this year. All three funds have gained between 16% and 19.2% since the beginning of the year.
BCSAX uses a dual approach of simultaneously investing in commodity-linked derivatives while maintaining equity exposure to commodity-related companies in the mining, energy and agricultural sectors. The fund has around $128 million in assets and charges a 5.25% sales load along with annual expenses of 1.5%.
(Related on ThinkAdvisor: Fund Managers Cut Cash, Buy Commodities and Emerging Markets)
In contrast to BlackRock’s approach, ARCIX and CRCAX only invest in commodity-linked derivatives that are actively managed. Also, both funds hold fixed income securities and cash instruments. ARCIX has $158.2 million in assets while CRCAX has just under $34 million.
