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Commodities – Money in Motion

• Inflation, tight supplies and increasing demand should be constructive for commodities.

• Investors have tended to overlook the asset class given weak performance for several years.

• Increased investor interest in the space could lead to significantly higher allocations going forward.


We have written in previous weeks about the relative attractiveness of commodities within the context of a well-diversified portfolio allocation. We won’t belabor the reasons behind our optimism other than to mention it rests on a three legged stool.

First, commodities have a high correlation to inflation, and current inflation levels at 40 year highs provides a tail wind to the asset class. Second, there has been significant under-investment in commodities resources in recent years, which should keep a lid on supply. Finally, increasing demand as economies open post pandemic should continue to drive prices higher.

We’d like to add another point to consider: investor’s allocations to commodities are relatively low compared to other asset classes and there is room for a potential expansion of that allocation as capital moves from relatively low expected returns to relatively high expected returns.

Over the past several years, investors have in large part overlooked commodities. This is not surprising given the performance of commodities over the last decade. The chart below shows the Bloomberg Commodity Index going back to 1999; we can see the performance between mid-2008 and early 2019 delivered negative returns to investors.

20220412-chart-1Since mid-2020 we have seen some positive returns to commodities and the number one question we’re hearing is “Did I miss the move?” For all the reasons detailed above, we would be inclined to say there could be more gains ahead. In addition, as more investors take notice of the recent performance, there could be additional capital allocated to the asset class.

The figure below shows the total amount recently invested in several major asset classes. Allocations to commodities are dwarfed even by cryptocurrencies and are a rounding error when compared to equity and debt allocations. Even a small movement of capital out of debt or equity could significantly increase the allocation to commodities.

20220412-chart-2With the recent volatility in markets, money is in motion and we expect that trend to continue. There appears to be adequate capacity and opportunity in commodities for investors seeking returns that have different characteristics than equities and bonds.

Important Disclosures & Definitions

An investor should consider the investment objectives, risks, charges and expenses carefully before investing. To obtain a prospectus containing this and other information, call 1-866-759-5679 or visit www.alpsfunds.com. Read the prospectus carefully before investing.

Performance data quoted represents past performance. Past performance is no guarantee of future results; current performance may be higher or lower than performance quoted.

All investments are subject to risks, including the loss of money and the possible loss of the entire principal amount invested. Additional information regarding the risks of this investment is available in the prospectus.

The Bloomberg Commodity Index (Total Return) (BCOM) is the primary prospectus benchmark for the ALPS | CoreCommodity Management CompleteCommodities Strategy Fund (the Fund). For standardized performance of the Fund, please click here.

Bloomberg Commodity Index: an unmanaged index used as a measurement of change in commodity market conditions based on the performance of a basket of different commodities. One may not invest directly in an index.

Correlation: a statistic that measures the degree to which two variables move in relation to each other.

ALPS Advisors, Inc. is the investment adviser to the Fund and CoreCommodity Management, LLC is the investment sub-adviser to the Fund. ALPS Advisors, Inc., ALPS Distributors, Inc. and ALPS Portfolio Solutions Distributor, Inc., affiliated entities, are unaffiliated with CoreCommodity Management, LLC.

ALPS Portfolio Solutions Distributor, Inc. is the distributor for the Fund.

JCI000900  04/30/2023

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