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The Commodity Curve

November 2017

Commodities

Monthly Performance

The Rogers International Commodity Index® methodology was up for the third month in a row at +0.97%, ahead of the Bloomberg Commodity Index (-0.46%). The positive performance for the month in the RICI® was driven by oil and oil-related products in the energy sector (+3.41%). The metals sector (-1.50%) gave back its gains from October, as many of the heavy industrial metals sold off. The agriculture sector was roughly flat (-0.07%).

Annual Performance

The RICI® ended the month up +1.71% year-to-date versus the BCOM which was still in negative territory at -1.24%. Overall, the commodity asset class has been performing well in the back half of 2017 with the RICI® up over 7% since June 30th. The Index has recovered fully from the energy-led decline that began in March of this year. Evidence continues to build that the global energy markets are coming into balance and the effects of massive capital expenditure cuts are having their impact. (See "The Cure for Low Crude Oil Prices...Is Low Prices", May 11, 2017). Expectations for broad global economic growth of 3.7% (Organization for Economic Cooperation) and a renewed focus on infrastructure spending worldwide (See "Infrastructure! The Long-Term Demand for Commodities is Growing", June 5, 2017)  are two important factors that bode well for the demand for raw materials looking ahead to 2018.

The Long Term Thesis

Commodities, after a long and deep bear market from 2011-2015, have rallied over +20% from their lows in February of 2016. Yet prices of the RICI® components are on average almost 50% below their highs (see presentation slide). The first key to the beginning of the recovery has been the tremendous pressure on producers due to the prolonged downturn which has caused marginal production to be closed and capital expenditures to be slashed. Major inflection points are almost always caused by changes in the supply side and can be enough for a multi-year reversion to the mean.

With the possibility of rising interest rates, a weakening dollar, inflation expectations beginning to rise, and fiscal stimulus in the form of global infrastructure spending replacing quantitative easing, the global macro outlook appears decidedly positive. From a diversification standpoint, the change in some of these global macro forces that should be positive for commodities may also cause headwinds in many other asset classes.

A Global Demand-Based Portfolio

The RICI® is a composite, US dollar-based, total return index methodology. It represents the value of a basket of commodities consumed in the global economy, ranging from Agricultural to Energy and Metal products. The Index's weights attempt to balance consumption patterns worldwide (in developed and developing countries) and specific contract liquidity. The value of this basket is tracked via futures contracts on 37 different exchange-traded physical commodities, quoted in four different currencies, listed on nine exchanges in four countries. 

(To access additional management commentaries & reports please visit our web site for Financial Advisors and Institutions by clicking here. For further insights visit our Commodity Curve Blog.)

Rogers International Commodity Index® Performance Comparison
August 1998 - November 2017

Access the full RICI® Monthly Summary Report (Download Here)

Index
November
Year-To-Date
Since Inception
RICI®
0.97%
1.71%
134.27%
BCOM
-0.46%
-1.24%
35.96%
S&P 500
3.07%
20.49%
240.81%

RICI® - Rogers International Commodity Index®; BCOM - Bloomberg Commodity Index; S&P 500 - S&P 500 Total Return Index.

The index returns shown above do not represent the results of actual trading of investible products, assets or securities. It is not possible to invest directly in an index. Exposure to an asset class represented by an index is available only through investable instruments based on that index and there can be no assurance that investment products based on the index will provide returns that are similar to the actual index performance or provide positive investment returns. All the indices referred to in this presentation above are not investable products and their returns do not reflect the fees and charges inherent in investing in a vehicle designed to replicate a particular index. Any index performance provided is for illustrative purposes only. The time period selected represents the inception date of the Rogers International Commodity Index® and is intended to provide a historical long-term average. Data provided by BarclayMAP. Past performance is not indicative of future performance.

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Commodities Mutual Fund

Index Descriptions

RICI® (Rogers International Commodity Index®): Comprised of 37 commodity futures contracts representing the energy, metals, and agriculture sectors. The components of the RICI® have been specifically chosen to give a balanced representation of consumption patterns throughout the world. The RICI® was first published on August 1, 1998. CQG Inc. is the official global calculation agent for the Rogers International Commodity Index® (RICI®).

Bloomberg Commodity Index (BCOM): The BCOM is a composite index of commodity sector returns representing an unleveraged, long-only investment in commodity futures that is broadly diversified across the spectrum of commodities. The Index is comprised of 22 commodities representing the energy, metals, and agricultural sectors. Prior to July 1, 2014, the Index was known as the Dow Jones-UBS Commodity Index which was first published in July 1998.

S&P 500 Total Return Index: The S&P 500 is an index consisting of 500 stocks chosen for market size, liquidity and industry grouping, among other factors. The S&P 500 is designed to be a leading indicator of U.S. equities and is meant to reflect the risk/ return characteristics of the large-cap universe.

Disclaimer

The Index returns shown in this presentation do not represent the results of actual trading of investable products, assets or securities. It is not possible to invest directly in an index. Exposure to an asset class represented by an index is available only through investable instruments based on that index and there can be no assurance that investment products based on the index will provide returns that are similar to the actual index performance provide positive investment returns. All the indices referred to in this presentation above are not investable products and their returns do not reflect the fees and charges inherent in investing in a vehicle designed to replicate a particular index. Any Index performance provided is for illustrative purposes only.

Exposure to the Rogers International Commodity Index® is typically gained by investing in “alternative” investment products that are linked to the performance of the RICI®.  Alternative investment products may entail leveraging, commodity trading and other speculative investment practices which involve substantial risk of loss.  Alternative investment performance can be volatile.  Not all products are suitable for all investors and some products may only be available to certain qualified and sophisticated investors.

“Jim Rogers”, “James Beeland Rogers, Jr.”, and “Rogers” are trademarks and service marks of, and “Rogers International Commodity Index” and “RICI” are registered service marks of, Beeland Interests, Inc., which is owned and controlled by James Beeland Rogers, Jr., and are used subject to license. The personal names and likeness of Jim Rogers/James Beeland Rogers, Jr. are owned and licensed by James Beeland Rogers, Jr. Products based on or linked to the Rogers International Commodity Index® or any sub-index thereof are not sponsored, endorsed, sold or promoted by Beeland Interests, Inc. (“Beeland Interests”) or James Beeland Rogers, Jr. Neither Beeland Interests nor James Beeland Rogers, Jr. makes any representation or warranty, express or implied, nor accepts any responsibility, regarding the accuracy or completeness of this report, or the advisability of investing in securities or commodities generally, or in products based on or linked to the Rogers International Commodity Index® or any sub-index thereof or in futures particularly.

This report does not constitute an offer to sell, or a solicitation of an offer to buy or sell, any commodities interests, managed futures accounts or securities, and is intended for informational purposes only. Any offer for any investment product will be made solely by the appropriate disclosure document or offering memorandum. Price Asset Management, LLC does not make any representations as to the accuracy or completeness of any data or information contained herein and such information should not be relied upon as such. Some data and information presented on this site may have been obtained from outside sources.

Investments in commodities, managed futures and other alternative investments involve a high degree of risk and performance can be volatile. An investor could lose all or a substantial amount of his or her investment. Investments in commodities, managed futures and other alternative investments are often executed on non-U.S. exchanges. Investing in foreign markets may entail risks that differ from those associated with investments in U.S. markets. Past performance is not indicative of futures results.

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