A recent research paper from PGIM’s David Blanchett examines how the optimal portfolio allocation to real assets — commodities in particular — varies by investment horizon, especially when considering the long-range effects of inflation on spending power.
The work demonstrates that commodities, while appearing to be relatively inefficient when focusing just on calendar year historical risk and return values, can actually play a pivotal role in retirement portfolios. This is especially true for clients who are inflation sensitive investors aiming to take a moderate amount of portfolio risk — a common characteristic of many retirement savers.
Adding to the argument for commodities, according to Blanchett, is evidence that global markets are in the early stages of a longer-term bull cycle for commodities.
“That makes commodities an attractive asset class to incorporate into strategic portfolio allocations,” Blanchett says.
See the slideshow for a selection of highlights from the new report that help to demonstrate the important potential role for commodity allocations in retirement portfolios.
Pictured: David Blanchett
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