Is this the beginning of a new commodity super cycle?

Raw materials: who is buying what?

Newton Investment Management

There is likely to be a sustained increase in demand for copper, lithium and cobalt. BNY Mellon Real Return has a small position in copper within the high yield core of the portfolio.

“As innovation relies more heavily on 5G technology and copper is an integral part of electric vehicles, its inclusion fits our view of a robust cyclical recovery in an accommodative policy setting,” said Catherine Doyle.

Pictet wealth management

Pictet believes that it will be difficult to reproduce commodity demand during China’s urbanization, but that commodity cycle will still matter. For multi-asset manager Shaniel Ramjee, the focus is shifting to underinvested areas in Latin America and EMEA. “Emerging economies have some of the most abundant mineral reserves required to make the green transition viable,” he said.

For example, copper mining has represented more than 10% of Chilean GDP over the past two decades.

Rathbone

Raw materials are not Rathbones’ everlasting friends. “They are speculative, complex and we wouldn’t need this exposure all the time,” said David Coombs, lead manager of his multi-asset portfolios. He uses raw materials to tactically hedge against risks.

He held exposure to industrial metals through a broad basket of commodities over the past year and would consider buying a pure industrial metals ETF, but not just now that the markets have soared over the past year.

Royal London Asset Management

Commodity prices move in long cycles caused by periods of under- or over-investment in production capacities. Trevor Greetham, Head of Multi-Asset at Royal London Asset Management, said we were at the end of a 10-15 year period of underinvestment.

He believes that economic activity could surprise positively as social distancing measures weaken and trillions of dollars are spent on resource-intensive infrastructure. Its funds are overweight in commodities, invest in a broad spectrum of energy, agriculture, industrial and precious metals and underweight in government bonds.

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