23/05/2011
By Laura Blows
Commodities will undergo another bull run once financial markets appreciate the threat of a global rise in inflation, Dighton Capital Management has claimed.
According to the managed futures fund manager, the recent pullback in prices is a temporary consolidation and the bull run in commodities will resume once inflation breaks out and gains momentum, offering long-only investors better growth potential than any other asset class.
Dighton Capital Management's principal and chief investment officer, Alex Moiseev, said: “We have not seen the end of the commodity cycle. It will probably be another two or three years before we see the peak in prices. The current consolidation period in commodities could last another two to 18 months. Investors are only beginning to see inflationary pressure and it is not officially recognised by governments. That is still putting the brakes on capital inflows into commodities.”
Moiseev added that the flood of money into the system through quantitative easing and the growing demand from emerging economies will put pressure on prices, with inflation taking years to control once started, causing interest rates to rise and resulting in Western economies facing stagflation.
Dighton also predicted that as a result of fears over the real value of money due to excessive quantitative easing and consistent devaluing of currencies by many countries, the price of precious metals will be driven up while growing demand from emerging market economies will raise prices of base metals, soft commodities and oil.
Other stories you may find of interest:
Hotting up
Ilonka Oudenampsen reports on how global events have impacted returns in the commodities space
Commodities hugely under-represented in portfolios
Commodities are under-represented in most pension portfolios, according to Colin O’ Shea and Jason Lejonvarn of Hermes. They argue that pension funds should invest more in commodities, as they give equity-like returns, improve portfolio diversification and are attractively priced right now.
