The stock and bond correlations of 2022 challenged traditional portfolios, resulting in many investors looking to further diversify their risk in alternative asset classes even now. For those investors seeking a time-tested portfolio diversifier, commodities may provide opportunities. The actively managed Neuberger Berman Commodity Strategy ETF (NBCM ) offers notable performance since inception compared to the benchmark Bloomberg Commodity Index.
Commodities provide an “offensive diversifier” according to Hakan Kaya, PhD, Senior PM at Neuberger Berman, who wrote about the asset class at the height of inflation in 2022. They provide historical outperformance during periods when inflation threatens. Commodities also provide the balance of defensive diversification due to their low correlations to stocks and bonds.
“They have tended to perform exceptionally well during ‘inflationary-bust’ or ‘stagflation’ scenarios, when growth disappointed,” Kaya noted.
Much remains unknown about 2025 and the impact of potential economic policy changes on inflation. With the Fed in no hurry to lower rates, investors may contend with an environment of higher for longer rates, or even rising inflation looking ahead. Commodities could prove a boon to portfolios in such an environment for the strong diversification potential they carry.
The Benefits of Active Commodity Exposure
The actively managed Neuberger Berman Commodity Strategy ETF (NBCM ) seeks total returns by investing in a diverse portfolio of commodities. By utilizing a risk-weighted approach, it seeks to reduce the impacts of market volatility. The strategy also focuses on commodity scarcity and works to hedge for the potential of backwardation and demand.
Since the fund’s inception in October 2022, NBCM is up 1.63% on a total returns basis compared to the Bloomberg Commodity Index’s 4.36% decline as of 11/15/24 according to Y-charts data. NBCM is up 3.22% YTD while the Bloomberg Commodity Index is up 1.97%.
The fund managers use quantitative models and fundamental analysis when evaluating securities for short- and long-term opportunities and optimizing roll yield. NBCM invests in long and short positions in commodities and fixed income securities, most of which are investment-grade bonds.
NBCM invests globally across six different sectors and 28 commodities that include gold and other metals, oil, agricultural products, and natural gas. The top commodities in the fund currently consist of gold at 18.02% weight, WTI crude at 8.24%, and brent crude at 8.22% as of 11/15/24.
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