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Commodity Market Continued Upward Trajectory in April

Commodities increased in April as positive fundamentals cotinued to support returns.

Nelson Louie, Global Head of Commodities in Credit Suisse’s Asset Management business, said, “Commodities continued an upward trajectory in April, and exhibited uncorrelated returns with traditional asset classes. It is noteworthy that the gains commodities have made thus far in 2014 have coincided with a period of lower than expected GDP growth for China. If this were 2012 or even 2013, sluggish data out of China most likely would have weighed heavily on commodities, making any fundamental idiosyncratic drivers of individual commodities insignificant. Instead, one-off event-driven risks which negatively affected supplies have actually been reflected in commodity return dynamics. If and when Chinese growth troughs, any advances here may support further upside to the commodities asset class.”

Christopher Burton, Senior Portfolio Manager for the Credit Suisse Total Commodity Return Strategy, added, “There is increasing possibility that domestic market core inflation may rise as improving growth prospects begin to reverse the persistent disinflation that was visible in many economies over the past few years. The most recent US nonfarm payrolls number was well above consensus expectations, and despite first quarter GDP weakness, risks seem to be skewed to US economic growth coming in stronger than anticipated going forward. The risk of inflation overshooting expectations is elevated. As a result, we believe investors will continue to benefit from the diversification benefits commodities offer as part of a portfolio.”

The Dow Jones-UBS Commodity Index Total Return increased 2.44% in April. Overall, 16 out of 22 index constituents posted positive returns. Agriculture was the best performing sector, up 3.48%, led by Coffee. Wheat also gained amid increased tensions between the West and Russia over Ukraine and a mid-month cold snap in the US, both of which threatened to limit supplies. Energy increased 2.98%, led by Natural Gas, due to lingering supply concerns. Gasoline also increased due to expectations of strong US demand as summer approaches, and relatively low inventory levels. Industrial Metals gained 2.98%. In addition to Nickel, Copper increased as a result of declining global inventories and better than expected durable goods data in the US. Precious Metals was relatively unchanged, down 0.09%. Although Silver decreased, Gold ended the month higher as escalating geopolitical tensions in Ukraine boosted the metal’s safe-haven appeal. Livestock declined 1.57%, led lower by Lean Hogs.

About the Credit Suisse Total Commodity Return Strategy
Credit Suisse’s Total Commodity Return Strategy has been managed for over 19 years and seeks to outperform the return of a commodities index, such as the Dow Jones–UBS Commodity Index Total Return or the S&P GSCI Total Return Index, using both a quantitative and qualitative commodity research process. Commodity index total returns are achieved through:
- Spot Return: price return on specified commodity futures contracts;
- Roll Yield: impact due to migration of futures positions from near to far contracts; and
- Collateral Yield: return earned on collateral for the futures.
As of April 30, 2014, the Team managed approximately USD 11.8 billion in assets globally.