Schroders Returns to Commodities as Funds Ride Materials Wave

(Bloomberg) -- Late last year, Schroders made an uncharacteristic move with a bullish call on energy and metals. With commodities from aluminum to oil surging, that bet is looking pretty good right now.

Commodities is “not an asset class that we’d naturally gravitate to,” said Alastair Baker, a portfolio manager at London-based Schroders, which oversees $88 billion. “Having had very strong growth in equities last year, it’s time to diversify your portfolio and cast your net more widely, given where we are in the economic cycle.”

Schroders isn’t alone. Money managers have almost tripled combined net-long positions across 18 U.S.-traded commodities in 2018, after cutting those bets by 61 percent in 2017, government data show. Assets in exchange-traded funds linked to commodities have jumped to $147 billion in 2018, up from $142 billion last year and a seven-year low of $87 billion in 2015.

Signs of synchronized global economic growth are boosting the demand outlook for industrial metals amid disruptions to supply, helping push the Bloomberg Industrial Metals Subindex Total Return to a five-year high last week. The Bloomberg Energy Subindex Total Return climbed to near the highest since 2015 amid geopolitical tensions that threatened to further tighten the market.

Schroders turned positive on commodities in November, particularly in industrial metals and energy as the sectors offered better returns than they did a few years ago, Baker said in a telephone interview.

To contact the reporter on this story: Luzi Ann Javier in New York at ljavier@bloomberg.net.

To contact the editors responsible for this story: James Attwood at jattwood3@bloomberg.net, Joe Richter, Steven Frank

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