Diversification, where capital is spread over a range of assets, is regarded as a critical factor for long-term success in financial investment. Someone holding different asset classes such as equities, bonds, cryptos or commodities in their portfolio will already be able to reduce their risk purely due to the lower correlation of the assets with each other. Since commodities are traded on futures exchanges, however, they are often the preserve of professionals. Now, though, structured products allow this exciting asset class to find its way into the portfolios of private investors. One key benchmark in this sector is the Bloomberg Commodity Index. The index was brought into being in 1998 and comprises 24 different futures that are traded on commodity futures exchanges. The barometer is designed so that no commodity makes up more than 15% of the index and no sector can represent more than one third of the barometer. The risk of clustering is reduced by annual reweighting.<\/p>\n
At the moment it is gold that is setting the tone in the Bloomberg Commodity Index, the heavyweight currently accounting for 15% of the barometer's performance. Thanks to the precious metal and its little brother, silver, the index is steering towards its high for the year. On the other hand, the energy raw materials oil and gas have lately been heading in different directions. While the price of natural gas rose by more than 40% over the month, the 12% decline in the price of a barrel of Brent crude put the brakes on the upward momentum of the index. Overall, energy raw materials make up around 30% of the index\u2019s weight. The benchmark also includes a large number of soft commodities, which account for as much as one third of the barometer's market capitalisation. Soya beans and maize are the \u201cbattleships\u201d of the agricultural commodities.<\/p>\n