One of the first UK funds to offer direct exposure to commodities has been launched by Dawnay Day Quantum.
The protected commodities accelerator runs for four years and gives full capital protection. It has a minimum investment of £15,000 for retail investors, who can gear their holding by 1.6 times their original investment. The investment period closes on November 12.
The fund is split equally between investment in crude oil, heating oil, natural gas, aluminium, lead, copper, nickel and platinum.
Commodities are mainly dependent on a very basic supply and demand model. Their value depends on demographics, macro-economics, technology and the length of time it takes to set up an operation that can extract them.
DDQ has analysed the market and believes that capacity on many commodities has almost been reached while demand is burgeoning in economies such as Indonesia, China, India and Brazil.
Real prices of commodities are as low as they have ever been since the mid-1930s after reaching a peak in 1980, says DDQ.
Chief executive Mark Mathias believes investment in commodities could improve the risk-reward profile for an investor since most commodity returns have a negative correlation with equities and bonds.
He says: “After a 20-year commodity bear market, prices are near to their all-time lows in real terms.
“Price rises over the last 18 months suggest that the cycle has turned. I believe that we are at the start of a long and sustained bull market in commodities, driven by rising global GDP and increasing consumption from the emerging giants – China and India, in particular.”