Commodity Market Increased Slightly in March Due to Encouraging Supply Fundamentals
Commodities increased slightly in March as positive fundamentals and heightened macroeconomic risk supported returns.
Nelson Louie, Global Head of Commodities in Credit Suisse's Asset Management business, said, "Commodities were driven largely by fundamental factors in March, and returns were generally uncorrelated with other asset classes. The key themes continued over from January and February, and were largely related to one-off event-driven risks which negatively impacted supplies. While weather risks seem to be subsiding in North America with the end of the winter season, the risk of further extreme climate events in South America and other parts of the world are still possible. In addition, heightened macroeconomic risk in Ukraine, and in other developing countries, most notably China, may continue to impact economically sensitive commodities."
Christopher Burton, Senior Portfolio Manager for the Credit Suisse Total Commodity Return Strategy, added, "In the US, monetary policy is expected to finally be on the path towards normalization. Federal Reserve Chair Yellen has begun her tenure by indicating quantitative easing was nearing its end and surprised many by indicating rates may be raised shortly thereafter. As monetary policy and economic conditions normalize, we expect correlations between commodities and traditional asset classes to continue to decrease. 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 0.41% in March. Overall, 10 out of 22 index constituents posted positive returns. Agriculture was the best performing sector, up 4.97%. In addition to Wheat, Corn ended the month higher as the USDA lowered its expectations for ending inventory amid strong demand. Soybeans also increased on continued strong US exports and very tight inventory levels. Livestock increased 4.38%, led by Lean Hogs. Industrial Metals declined 1.56%. China saw its first ever domestic corporate bond default, adding to existing concerns over the government's seeming desire to tighten credit conditions. Energy decreased 1.77%, led lower by Natural Gas, as apprehension over winter supplies eased. Forecasts shifted to expectations for milder weather in the near term outlook, which would curb heating demand. Precious Metals declined the most, down 3.97%, led lower by Silver. Gold also declined due to concerns over physical demand out of China and India, as well as continued selling following the more hawkish-than-expected March FOMC meeting communication.
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 March 31, 2014, the Team managed approximately USD 11.7 billion in assets globally.
Perrin Wheeler, Corporate Communications, tel. 212 325 8978, email@example.com
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Certain risks relating to investing in Commodities and Commodity-Linked Investments: Exposure to commodity markets should only form a small part of a diversified portfolio. Investment in commodity markets may not be suitable for all investors. Commodity investments will be affected by changes in overall market movements, commodity volatility, exchange-rate movements, changes in interest rates, and factors affecting a particular industry or commodity, such as drought, floods, weather, livestock disease, embargoes, tariffs and international economic, political and regulatory developments. Commodity markets are highly volatile. The risk of loss in commodities and commodity-linked investments can be substantial. There is generally a high degree of leverage in commodity investing that can significantly magnify losses. Gains or losses from speculative derivative positions may be much greater than the derivative's original cost. An investment in commodities is not a complete investment program and should represent only a portion of an investor's portfolio management strategy.