The strategy seeks to outperform its benchmark over a full market cycle, achieve uncorrelated, equity-like returns, and provide diversification and mitigate the harmful impact of inflation.
WHY COHEN & STEERS
Tenured portfolio managers solely dedicated to commodities with an average 27 years of industry experience co-managing active strategies through various market environments
Proprietary data tools and deep analytics drive specialized research
Specialized resources including risk management, derivatives trading, and performance analytics as well as extensive collaboration with the other real asset investment teams
WHY ACTIVE COMMODITIES
This multi-dimensional investment process involves four core dynamic components: relative position weights, spread trades, enhanced roll yield and collateral management.
Bottom-up analysis used to build a diversified portfolio invested across commodity sectors including energy, industrial metals, agriculture, livestock and precious metals
Invests entirely in derivatives, primarily through the use of futures, which we believe provide liquid, direct, and inexpensive exposure to commodities markets
We believe an active, long-biased approach to commodities based on fundamental research has the potential to generate alpha while providing the diversification benefits of a commodities allocation within a broader portfolio.
The strategy employs an active, long-biased investment process based on fundamental research and seeks to outperform its benchmark over a full market cycle, achieve uncorrelated, equity-like returns, and provide portfolio diversification and mitigate the harmful impact of inflation.
Commodities have delivered historically strong performance, providing inflation hedging, diversification and compelling returns, with the potential to contribute meaningfully to a real assets allocation.
April 2022 | 17 mins
WHY INVEST WITH US
Delivering value to our clients
Cohen & Steers has been offering new and creative real asset and income-oriented investment solutions for both institutional and retail investors for more than 35 years. Research and active portfolio management remain the cornerstones of our investment process, backed by our commitment to deliver superior performance and to provide each client with the highest levels of service.
An experienced team
We believe an active, long-biased approach based on fundamental research has the potential to generate alpha while providing the diversification benefits of a commodities allocation within a broader portfolio. The strategy invests entirely in derivatives, primarily through the use of futures, which we believe provide liquid, direct, and inexpensive exposure to commodities markets.
The team conducts in-depth, bottom-up analysis on commodities to build a diversified portfolio invested across commodity sectors, including energy, industrial metals, agriculture, livestock and precious metals. They analyze supply & demand fundamentals, inventory metrics, valuation, market participant composition, technical factors and the shape of the futures curve.
We complement the strength of our extensive internal research with insight provided by external industry experts and alternative data providers, who specialize in individual commodity markets. Based upon the bottom-up research, the investment team seeks to actively implement the strategy by setting relative commodity position weights, employing long/short spread trades, and actively analyzing the commodity term structure to maximize roll yield.
Our investment process
The strategy’s investment process is rooted in rigorous fundamental research focusing on the analysis of supply and demand balances, inventories, valuation, and other technical factors that affect price discovery for a broad universe of commodities. Based upon this bottom-up research, the team seeks to actively implement the strategy by tactically setting relative position weights, employing long/short spread trades, and optimizing contract selection and roll timing.
The strategy’s investment universe is comprised of approximately 30 commodities. We also follow and may invest (up to 20%) in out-of-universe commodities—if they meet specific liquidity guidelines. The investment team seeks to construct a broad, well-diversified portfolio at both the commodity and contract levels.
TThis is the cornerstone of the investment process and drives portfolio construction. The investment team performs extensive research and analysis of each commodity’s supply and demand fundamentals, analyzes relevant macro and market factors and develops an informed valuation forecast.
This ongoing process involves three interconnected practices: setting relative commodity position weights, employing commodity spread trades and roll yield management.
Closed-end funds finished the quarter down following persistent inflation and continued talk of monetary policy tightening.
Head of Private Real Estate James Corl spoke with Institutional Investor for a feature story on our recent whitepaper and why an optimized real estate portfolio may require access to both listed and private markets.
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We’d be happy to answer questions about our investment solutions or any corporate-related inquiries.
We consider the information in this communication to be accurate, but we do not represent that it is complete or should be relied upon as the sole source of suitability for investment. Investors should consult their own investment professional with respect to their individual circumstances.
Past performance does not predict future returns. Risks involved with investment, including potential loss of capital, are substantial and should be carefully considered. The views and opinions are as of the date of publication and are subject to change without notice. There is no guarantee that any historical trend illustrated above will be repeated in the future, and there is no way to predict precisely when such a trend will begin. There is no guarantee that a market forecast made above will be realized. Active management is not guaranteed to outperform the broader market index.
Important Risk Considerations: Investing involves risk, including entire loss of capital invested. There can be no assurance that the investment strategy will meet its investment objectives. Diversification is not guaranteed to ensure a profit or protect against loss. An investment in commodity-linked derivative instruments may be subject to greater volatility than investments in traditional securities, particularly if the instruments involve leverage. The value of commodity-linked derivative instruments may be affected by changes in overall market movements, commodity index volatility, changes in interest rates, or factors affecting a particular industry or commodity, such as drought, floods, weather, livestock disease, embargoes, tariffs and international economic, political and regulatory developments. The use of derivatives presents risks different from, and possibly greater than, the risks associated with investing directly in traditional securities, including market risk, credit risk, counterparty risk, leverage risk and liquidity risk. Derivatives can lead to losses because of adverse movements in the price or value of the underlying asset, index or rate, which may be magnified by certain features of the derivatives.
Futures Trading Is Volatile, Highly Leveraged and May Be Illiquid.
Investments in commodity futures contracts and options on commodity futures contracts have a high degree of price variability and are subject to rapid and substantial price changes. Such investments could incur significant losses. The use of options on commodity futures contracts is to enhance risk-adjusted total returns. The use of options, however, may not provide any, or only partial, protection for market declines. The return performance of the commodity futures contracts may not parallel the performance of the commodities or indexes that serve as the basis for the options it buys or sells; this basis risk may reduce overall returns.
Active management is not guaranteed to ensure a profit or protect against loss and may underperform the broader market index.