Why Own Commodities?
Commodities play a crucial role in both the global economy and in constructing a well-diversified portfolio. Commodity markets are generally large and liquid, and have grown substantially in recent decades. Commodities can play an important role in a portfolio by offering diversification and growth potential.
Access to Additional Markets
Commodity strategies offer access to very large markets that have grown significantly in recent decades. Historically, commodities have provided a potential hedge against inflation, and have been used as an investment to help participate in the global economy. As these markets fluctuate, a diversified commodities portfolio with the ability to go long or short can provide the potential for profits in both rising and falling commodity markets.
Long/short commodity strategies have historically provided strong returns, and their performance has generally not moved in tandem with stocks or bonds. Adding investments such as long/short commodities, with a low correlation to other asset classes, provides the potential to reduce risk and improve returns in traditional investment portfolios.
|Long/Short Commodities||U.S. Stocks||Bonds|
Source: LoCorr Fund Management.
Past Performance is not a guarantee of future results. The referenced indices are shown for general market comparisons and are not meant to represent the Fund. Long/Short Commodities represented by HFRI Macro Commodity Index. U.S. Stock represented by S&P 500. Bonds represented by Bloomberg US Agg Bond.
Potential to Enhance Returns
While commodities can be an important asset class in a well-diversified portfolio, historically, the majority of commodity investments have been long-only. Long-only commodity investments can be highly volatile and subject to significant drawdowns when prices decline, as seen in the graph below. Adding long/short commodities to a portfolio provides the potential to generate higher returns, lower risk, and achieve better capital preservation than long-only commodities.
Growth of Investment
Growth of a Hypothetical $1,000 investment on January 1, 2008, through December 31, 2022
|Average Annual Return||Volatility||Max Drawdown|
|Long-Only Commodities||-4.93%||24.02%||-87.22%|Index Returns
|1 Year||5 Years||10 Years|
|HFRI Macro Commodity Index||14.95%||9.05%||4.48%|
|S&P 500 Index||-18.11%||9.42%||12.56%|
|BBg U.S. Aggregate Bond Index||-13.01%||0.02%||1.06%|
|S&P GSCI Commodity Index||25.99%||6.46%||-3.30%|
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