Commodities

Risk can be greatly reduced by concentrating on only a few holdings.
— Warren Buffet

Commodities add further diversification benefits to a portfolio. Gold, for example has a correlation of just 0.09 with the FTSE 100. Over long periods of time the CFA Institute has found that portfolios containing a significant exposure to precious metals experience higher average annual returns whilst exhibiting lower levels of volatility.

Our current investment selection includes:

COMMODITY	RATIONALE
Gold	Protects portfolio against inflation, particularly topical given the current debt levels and QE programmes. Gold is regarded as a ‘safe haven’. The high reached in the 1980s equates to $2,200 today in inflation-adjusted terms.
Silver	Similar to gold in that it is a store of value – the words for silver and money are in fact the same in 14 different languages. Is trading at a historic low vs. the gold price. Unlike gold, silver is “consumed” in industrial processes which will support the spot price.
Platinum	Will benefit for increasing Chinese demand for cars, rising inflows into ETFs and its reputation as a store of value.
Palladium	Will benefit for increasing Chinese demand for cars, rising inflows into ETFs and its reputation as a store of value.

Exposure is obtained by purchasing exchange traded funds that are listed on the London Stock Exchange, which hold the physical allocated metal under trust in a vault at HSBC and have very low management fees.