Diversified commodity exposure is structurally under-owned
The guest argued that investors should add diversified commodity exposure to their portfolios to hedge against persistent inflation and geopolitical oil shocks.
The argument
The guest noted that almost no retail or institutional investors currently hold direct oil or commodity exposure. He argued that commodities provide highly convex payoffs during geopolitical crises and offer a positive roll yield due to a backwardated futures curve.
The thesis, stress-tested
✓ What validates it
- ✓Oil prices sustaining levels at or above $100 per barrel
- ✓Continued downward slope (backwardation) in the oil futures curve
▸ Risks discussed
- ▸Buying late after a major price run-up
- ▸Potential leakage of unexpected supply back onto the global market
Hear it yourself
"The bigger thing is for most investors, basically, no one has exposure to diversified commodities in their portfolio. Right? Not basically, no one. I went I went to the CFA event two CFA events a couple weeks ago right after the war broke out, and I asked people, how many of you have oil or long oil, long oil positions in your portfolio?"
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