Institutional investors are once again turning their attention to commodities, viewing precious and industrial metals, agricultural goods and energy companies as strategic components in portfolio construction. “The complexity that comes with commodity exposure can be optimally managed through the use of dedicated compartments”, explains Daniel Knoblach, Board Member at Super Global Services SA.
Commodities are gaining renewed relevance in the strategic asset allocation of institutional portfolios. Several global economic and geopolitical factors are driving this trend. “Persistent core inflation in the United States is prompting some investors to seek inflation hedges. Others are relying on a broad basket of commodities to diversify their holdings, while another group is making targeted investments based on structural trends – such as the advancement of decarbonisation”, notes Knoblach.
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The investment objectives are as diverse as the motivations behind them. While some investors are currently turning to traditional options such as physical gold or silver, others are exploring opportunities in funds focused on rare earths or agricultural commodities – or even direct investments in mining companies. In addition, many are pursuing specialised strategies, including short positions on individual commodity prices or ESG-aligned investments, including in companies producing green hydrogen. “The sheer variety of vehicles and strategies makes the topic complex, especially for those seeking a well-diversified commodity exposure”, says Knoblach. “Allocating via a compartment can offer an effective solution.”
Using compartments under Luxembourg law, commodities can be seamlessly integrated into portfolios alongside other asset classes. Each investment strategy is packaged into a depositable instrument with an ISIN, enabling straightforward bank trading. This eliminates operational burdens such as securing storage for physical precious metals. The structure, compliant with Luxembourg’s securitisation law, provides legal certainty and transparency – particularly in terms of tax treatment. “A compartment gives investors full control while reducing complexity”, adds Daniel Knoblach. “Investment management is carried out by experts, and we are the specialists for the associated administration.”