IDEA of the month: Increasing the real assets share by buying commodities
Investors have become increasingly cautious on ‘nominal’ assets over recent months, in particular sovereign bonds, due to high sovereign debt levels in the developed countries and central bank actions like …….
quantitative easing. The increasing caution is reflected in rising bond yields and outflows out of bond funds. In this environment our “Short IBOXX Euro Sovereigns Eurozone TR Index” continues to work well and we keep the 20% weight.
Instead of nominal assets investors have preferred ‘real’ assets over recent months including commodities and equities and we expect this trend to continue.
We increase the weight of ‘real’ assets by buying a well diversified commodity index DBLCI with 10% weight. The index has a reduced oil weight of only about 32% and is hedged in Euro. Our commodity strategists believe the commodity complex will enjoy a fresh wave of investment inflows in 2011. They expect this will be based on investor appetite to gain exposure to emerging markets, as a tool to hedge against tail events and market anxiety towards higher inflation ahead.
We keep the portfolio share of equities stable at 30%. The asset class scorecard is more positive for equities than in any time in the last 2 years. In our view, equities could in 2011 become increasingly viewed as a real asset and a real alternative to bonds. We increase our weights for Utilities and Banks from 5% each to 7.5%. We keep our 10% weight of the Dax supported by a strong German economy. For 2011, our economists expect Germany to post the strongest GDP
growth in a diverse Eurozone. Many German companies benefit from strong emerging market growth by exports and also by leveraging their globallysuccessful business models.
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Source: Trading Ideas ETF: Ideas and Flows – Deutsche Bank AG