Commodities Fund — The Market Brief Daily

01 Strategy & Academic Basis

📐 Gorton & Rouwenhorst (2006) · Bhardwaj, Gorton & Rouwenhorst (2015)

The Commodities Fund is grounded in the research of Gorton and Rouwenhorst (2006), who demonstrated that a diversified commodity futures portfolio exhibits returns comparable to equities with low correlation to both stocks and bonds — making commodities a genuinely valuable diversifier. Returns in commodity futures arise from three sources: spot price changes, roll yield (the curve structure premium), and collateral return from T-bills posted as margin.

The portfolio actively manages roll yield by selecting contracts along the term structure to maximise backwardation exposure and minimise contango drag — a discipline shown to significantly improve commodity returns by Erb & Harvey (2006). Allocations are rebalanced monthly and reviewed quarterly for structural shifts in supply/demand fundamentals.

02 Investment Pillars

01 Inflation Hedge Commodity prices have historically exhibited a strong positive correlation with unexpected inflation — CPI beta of ~1.4.

02 Portfolio Diversifier Near-zero correlation to global equities and negative correlation to bonds in inflationary regimes.

03 Roll Yield Optimisation Actively select contracts to capture backwardation and avoid contango — the dominant driver of long-run commodity futures returns.

04 Supercycle Positioning Structural overweight to energy transition metals (copper, lithium) aligned with the multi-decade decarbonisation capex cycle.

03 Simulated Performance

Cumulative Return vs Bloomberg Commodity Index

04 Commodity Allocation

Sectors 4

05 Holdings & Instruments

Security	Commodity Sector	Instrument	Weight

06 Macro Positioning & Investment Thesis

Regime as at May 2026

Of all the strategies on this platform, the Commodities Fund is the most directly levered to the prevailing macro reality. A supply-driven inflation shock, a closed energy chokepoint, a disrupted food and fertilizer supply chain, and an AI build-out hungry for industrial metals together form an almost textbook commodity tailwind.

Energy A geopolitical supply shock

The closure of the Strait of Hormuz — through which roughly a quarter of seaborne oil and a fifth of LNG passes — removed supply, not demand. More than 80 Gulf energy facilities have been damaged with restoration estimated at up to two years, meaning the shock is persistent rather than transitory. Energy contributed more than 40% of the April US CPI gain. This is the cleanest inflation-driven catalyst the energy sleeve could be positioned for.

Agriculture The fertilizer and grain squeeze

Around a third of globally traded fertilizer transits the Strait, and the disruption has stranded grain cargoes while rationing scarce shipping capacity by price — pushing lower-margin agricultural freight to the back of the queue. Arriving as the Northern Hemisphere planting season begins, the combination of higher fertilizer costs and delayed nutrient supply threatens next season's yields, supporting agricultural commodity prices well beyond the immediate headlines.

Metals Inflation hedge meets AI demand

Precious and industrial metals carry a dual thesis. Gold and silver are classic inflation and currency hedges, reinforced by US debt above 124% of GDP and central-bank accumulation. But they are also industrial inputs to the AI build-out: silver has the highest thermal and electrical conductivity of any metal and is used in GPU/TPU interconnects, packaging, switchgear and busbars, while each megawatt of data-centre capacity needs roughly 27 tonnes of copper. Copper touched a record ~$6/lb in January 2026. The same capex wave driving the technology sector is tightening the physical metals market the fund owns — inflation protection and structural demand in a single allocation.