Cazenove believes there is upside potential in soft commodities and says its views were verified during talks with Invesco Perpetual’s star fund manager Neil Woodford, who believes biofuel demand will push up prices.
The JP Morgan fund does not invest in soft commodities so Cazenove felt it needed to have some exposure to this area.
The Schroder fund is a Luxemburg-domiciled portfolio launched in October 2006 but it did not have UK distributor status at launch, which meant it was not tax efficient for UK investors. The fund recently received distributor status and this was a motivating factor in Cazenove’s decision to invest.
The multi-manager sees diversification within the commodities sector as consistent with its strategy of broad diversification within a range of uncorrelated asset classes.
Cazenove head of multi-manager Mark Harries says says: “The diversity fund has only had two negative months in the last 20 and it was first quartile again in April. We’re not surprised by this consistency. You have to broadly diversify to achieve that because trying to predict the short-term outlook is almost impossible to do.
“Typically, funds in the cautious managed sector are 60 per cent equities and 40 per cent bonds so if bonds do badly we are to a degree shielded from that by exposure to alternatives such as commodities.”