What role can commodities play within a client's overall portfolio?
Jeffrey Sherman, portfolio manager of DoubleLine's new Strategic Commodity Fund, explained the rationale for investing in commodities during a conference call hosted by the firm on Tuesday afternoon.
Since its inception, the DoubleLine Strategic Commodity Fund, which was launched on May 18, has outperformed the Bloomberg Commodity Index by close to 200 basis points as of Aug. 31.
"We've been running various permutations of commodity strategies here at DoubleLine inside our macro-centric funds for about three and a half years," Sherman said, adding, "There's nothing specific to the timing of the launch of the [Strategic Commodity Fund], although we do think it's more attractive to be thinking about an asset allocation to commodities. But, what we're really trying to do is really find what the right opportunity set is and deliver something that we think has an evergreen approach."
The objective of the DoubleLine Strategic Commodity Fund (DBCMX, DLCMX) is to seek long-term total return through long exposures to one or more indexes of commodities and through long and short positions on individual commodities.
It does this through exposures primarily through derivatives contracts, securities or other instruments that provide a return tied to a commodities index, a basket of commodities, individual commodities or a combination thereof.
From a long-only perspective, Sherman explained why any investor would think about having assets allocated to commodities. He outlined four specific benefits of exposure to a long-only commodity investment.
First is the diversification benefit. He says there is a potentially low-to-uncorrelated return source relative to traditional asset classes.
"I think anyone who's been in this space the last couple years sees that commodities have performed in a lot of different directions over the short, medium-term period," he said. "Commodities have exhibited not a perfect correlation to any sector of the market – you have low correlations to some sectors of the market and then negative correlations from others. From a diversification standpoint, this could help lower and dampen overall portfolio volatility when thought of as a multi-sector portfolio."
