New York, 12-3-2014 — /EuropaWire/ — Nelson Louie, Global Head of Commodities in Credit Suisse’s Asset Management business, said, “As of the end of the month, the path for Ukraine was unclear. Russia’s show of force across the Crimean Peninsula stoked supply-risk worries across oil markets as Russia is the world’s third largest oil producer and its second largest exporter. It is possible that any further heightening of tension could affect relations with Russia and, in turn, the oil supply and demand in Europe, as well as the outcome of negotiations surrounding the war in Syria, and sanctions on Iran. Ukraine is also a large wheat exporter and could tighten the wheat supply/demand balance should the conflict escalate.”
Christopher Burton, Senior Portfolio Manager for the Credit Suisse Total Commodity Return Strategy, added, “February continued the 2014 theme of commodities being driven by fundamental factors, largely uncorrelated with other asset classes. This included severe weather affecting Agriculture, a virus affecting Lean Hog supplies, and multiple sectors affected by tensions in Ukraine. We believe correlations between commodities and traditional asset classes will continue to remain low. We anticipate individual commodities will continue to be increasingly driven by commodity-specific factors, and we continue to expect commodities to provide valuable portfolio diversification benefits going forward.”
The Dow Jones-UBS Commodity Index Total Return increased 6.24% in February. Overall, 20 out of 22 index constituents posted positive returns. Agriculture was the best performing sector, up 11.51%, with all sector components producing positive returns. In addition to a drought in Brazil potentially limiting Coffee, Soybean and Sugar supplies, Wheat and Corn also ended the month higher. The US Department of Agriculture reported increased wheat export demand out of the US compared to the same period in 2013 while it simultaneously reduced its estimate for 2014 inventory levels by approximately 8%. Cold weather in the US has damaged some crops in the Southeast and Midwest and recent extreme weather patterns may elevate supply risk during the summer as well. Precious Metals gained 7.70% as uncertainty in emerging markets, including heightened tensions in Ukraine, enhanced the appeal of Silver and Gold as stores of value. Livestock increased, up 6.86%, led by Lean Hogs. Live Cattle was also higher due to thinning supplies. Energy also increased, up 2.60%. Crude oil and petroleum products were higher after disappointing US economic data early in the month led to speculation that the Fed may be forced to slow down its tapering. Heightened tensions in Ukraine also added some risk premium to the sector. Industrial Metals ended the month higher, up 1.97%, led by Zinc as a global production deficit is expected to widen in 2014, limiting supplies.
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 February 28, 2014, the Team managed approximately USD 11.7 billion in assets globally.
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This document was produced by and the opinions expressed are those of Credit Suisse as of the date of writing and are subject to change without obligation to update. It has been prepared solely for information purposes and for the use of the recipient. It does not constitute an offer or an invitation by or on behalf of Credit Suisse to any person to buy or sell any security. Any reference to past performance is not a guide to future performance. The information and analysis contained in this publication have been compiled or arrived at from sources believed to be reliable but Credit Suisse does not make any representation as to their accuracy or completeness and does not accept liability for any loss arising from the use hereof.
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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.
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