Commodity investments are gaining in importance for institutional investors because they can make a positive contribution to the risk diversification of a balanced portfolio. Union Investment has extensive expertise in this asset class and uses a sophisticated approach with a proven track record.
Commodities are typically considered a volatile asset class. But as an addition to a portfolio, they can actually reduce the overall risk thanks to their low correlation with many traditional asset classes over the long term. This makes them a valuable portfolio component.
Why investing in commodities with Union Investment is a good idea
Highly liquid and broadly diversified
A commodity investment through Union Investment is a highly liquid investment because our mutual funds and client portfolios invest in commodities indirectly via derivatives.
The focus is on a broad level of diversification. Exposures to the energy sector, precious metals and industrial metals are weighted equally. Within each sector, our fund managers actively select individual commodity positions for the portfolio.
Experienced portfolio managers
The team consists of three experts who have been working together for four years and have an average of 15 years’ experience in the capital markets.
Our experts combine their skills in research, strategy and portfolio management with a transparent investment process in order to achieve replicable results.
Proven track record
In terms of assets under management, Union Investment is a major and very experienced commodities investor in Germany that provides tailored solutions.
The Commodities-Invest fund, a broad-based mutual fund for institutional investors, has been trading successfully since 2006. The fund has demonstrated its robustness with a strong relative performance even during the coronavirus pandemic.
Commodities such as copper, gold and oil are a very particular asset class. They are physical assets that offer protection against inflation and potential for long-term capital preservation.
Investment approach differs clearly from benchmark concepts
To participate in the global commodities markets, we use our proprietary, intelligent RADAR strategy, which differs significantly from standard commodities indices. Together with Morgan Stanley, Union Investment has created the MS RADAR ex Agriculture & Livestock commodities index (euro-hedged) and continues to develop it further on an ongoing basis.
The energy sector, precious metals and industrial metals are very consciously weighted equally in this index in order to avoid the dominance of energy commodities and the associated volatility, which are typical for conventional commodities indices.
The optimisation of the roll yield along the future curve makes spot prices investable, which is a crucial factor for performance.
Union Investment’s active management approach builds on this and seeks out clear overweights and underweights in accordance with our scoring models. Within any one sector (e.g. industrial metals), our allocation is spread across a wide variety of individual commodities, such as copper, lead or zinc.
The idea: being positioned at the point where the roll yield is highest
Commodities future curve
Investing in the asset class of commodities or in the Commodities-Invest fund can also entail risks
Market-related volatility in prices and returns and credit risk relating to individual issuers/counterparties
Increased price volatility due to risk concentration in specific industries
Increased risk of price volatility and loss or default for investments in emerging markets and developing countries
Increased price volatility due to the use of certain methods and instruments (e.g. derivatives)
Increased price volatility due to the composition of the Commodities-Invest fund
Potential exchange rate risk
Union Investment offers investors a unique approach. Our proprietary strategy – with characteristics such as roll yield optimisation, the equal weighting of all three commodity sectors and active allocation within each sector – differs greatly from our competitors’ solutions and boasts a strong relative performance record, even during the coronavirus crisis!
FundAward 2022 for Union Investment’s commodities strategy
The annual Euro FundAwards are presented by Finanzen Verlag GmbH and recognise the funds that generated the best performance in a particular year. Prizes are awarded to the three best-performing funds in a range of fund categories and for several time horizons. The Commodities-Invest fund for institutional investors and the UniCommodities fund for retail clients each received this coveted accolade for both the three-year horizon and the five-year horizon.
Your contact person
If you have any questions or would like to obtain further information, please find your dedicated contact below.
Latest expert views
All analyses, white papers and studies can be found in one place under "Expert Views".