# Investing in Global Commodities



## spider7 (1 Feb 2007)

Hi, I am hoping somebody can give me some advice.
A relative of mine keeps banging on about investing in Global Commodities. Apparently Eddie Hobbs promotes theme - so they must be good!!

Basically i need to know,
what are Global Commodities?
are they a good investment?
Where can i invest in them?
(My relative says Eagle Star have a a good Global Commodities  investment portfolio, any other options?)

Many Thanks in advance.


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## Certina (15 Feb 2007)

Two of the ways you can do this are:  

1) Invest in a basket of shares that cover Energy, Base & Precious Metals & Soft Commodities (Agricultral, Coffee, Orange Juice etc) 
A number of these bases would be covered on the FTSE100. 

2) Invest in a Structured product that protects you initial capital & gives you direct exposure to the performance of Commodities (as above)


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## Del3D (15 Feb 2007)

One other way that I am currently examining are Exchange Traded Commodities (ETCs) - See:

[broken link removed]

These can be traded like ETFs with any broker and the annual commission seems to be about 0.5%. Beats storing barrels of crude oil in your garage!

I am currently only reading about them and have not bought any as yet.


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## gonk (15 Feb 2007)

Other ways to invest in commodities include:

(1) Buy some! For example, you can buy gold directly. Search this forum for more info.

(2) Invest in a unit linked fund which specializes in commodities, e.g., this JP Morgan fund which invests in metal & energy stocks:



(While I've invested in this myself, I'm not recommending it particularly, just giving it as an example.)

(3) Use spread bets to invest in a range of commodities from gold and oil, to agricultural commodities like coffee, pork bellies or orange juice. (Be aware though that spread bets are highly-geared investments and are consequently high risk. Don't put your life savings into it!)


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## Wilkes (16 Feb 2007)

Just for clarification the JP Morgan fund is not unit linked it is a unitised fund under an Open Ended Investment Company (OEIC) based at the Luxembourg FSC and complies with UCITS transparency, auditing etc. Its an investment in the supply sidfe of the market and AA rated by S&P. Its possible to get into it at very low entry costs through its distributors.

KBC, a fund wholesaler to the retail sector is a Belgium asset manager with about 160bn under management and has been in the new cenergy and commodities sector for five years. It offers a play on Water, Eco Energy, Commodities, Emerging Markets and discretionary investment as a mixed startegy through The Innovator Fund via New Ireland a Bank of Ire subsidiary. 

Both of these look like an interesting mix if put together in a portfolio. The Eagle Star fund invests in the GSCI ie Goldman Sachs Commodities Index which is based, not on mining, rigging, or technology companies in the sector but on commodity futures with a 70% emphasis on Oil Gas and metals. Nothing wrong with adding this to your basket and a  mix of all three would help you diversify across this huge sector.


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## gonk (16 Feb 2007)

Wilkes said:


> Just for clarification the JP Morgan fund is not unit linked it is a unitised fund


 
Now I'm displaying my ignorance, which is all the more deplorable as I've already invested in the thing, but what's the difference? Is there any difference in tax treatment for example?


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## Wilkes (17 Feb 2007)

Hi Gonk, well it depends on your pov. For me guaranteed Auditing of costs of a UCITS fund is critical and while a Unit-Linked Policy issued by a Life Office may use unit accounting as a book keeping device the unit linked life fund is not subject to independent audit, just the Life Office itself.

Next comes the issue of custodianship of your money. In the UCITS JP Morgan will not hold the title documents to the fund assets ie in this case mining share certificates, hence your money does not form part of their balance sheet. This point was critical for investors through Baring Asset Managers when Barings Bank collapsed. Through a unit linked fund all monies are held on the balance sheet of the Life Office protected only by statutory compensation of €20,000 (?) or so.

Finally there is the thorny issue of costs dragging your return. In the UCITS the total expenses must be declared, simple when you've auditing. These are expressed as a % of the fund assets hence the term Total Expense Ratio, a subset of which is the AMC %. In a Unit Linked policy all you see are the front end Unit Linked Policy charges. You simply do not know what expense loading the fund is experiencing in the background for dealing costs but it would be fair to suggest that the discounts mega global groups get for everything from dealing fees to fx would be a lot more efficient than a comparatively small domestic Irish Life office.

BTW the comparison of UCITS TER vs Unit Linked fund charges is obviously invalid. The UCITS is a far better model and which also uses single unit pricing ie a price based on NAV ( net asset value). Unit Linked policies use dual pricing ie Bid / Offer spreads generally. Critics believe that this allows scope for the fund actuary to price against large movements in and out of the fund since the Bid and Offer strike prices are not independently audited but exist under the faith system ie that appointed actuaries ( paid by the Life Office) would never engage in such unfair practices.


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## smiley (18 Feb 2007)

Del3D said:


> One other way that I am currently examining are Exchange Traded Commodities (ETCs) - See:
> 
> [broken link removed]
> 
> ...


 
the bid offer spread is high on these...not as liquid as you would like.....

http://www.askaboutmoney.com/showthread.php?t=41603&highlight=commodities


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## tonster01 (22 Apr 2008)

Has anyone invested in a specific mining INDEX?,

Currently own the MerrilL Lynch world mining fund which is doing well but would like to reduce my fee's tbh,

Basically track the underlying mining index if at all possible,

Thanks in advance


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## NikolazTesla (22 Apr 2008)

spider7 said:


> Hi, I am hoping somebody can give me some advice.
> A relative of mine keeps banging on about investing in Global Commodities. Apparently Eddie Hobbs promotes theme - so they must be good!!
> 
> Basically i need to know,
> ...


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## mickman (23 Apr 2008)

no offense but when people like the above is recommended by his relative "banging on about " commodites and to invest in them , its a sure sign that the rally is nearing the end. oil is at euphoric prices at the moment,


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## z106 (23 Apr 2008)

mickman said:


> no offense but when people like the above is recommended by his relative "banging on about " commodites and to invest in them , its a sure sign that the rally is nearing the end. oil is at euphoric prices at the moment,


 
Well a lot of high profile analysts (Jim Rogers,George soros to name 2) reckon there's another 15 years in teh run.

Oil at euphoric prices? 
The same could have been said at anytime in the last 12 months.
It has risen 85% in the last 12 months.
A lot are now talking of 150 (E.g. Boon pickens for one - a legendary energy trader).

Generally speaking it's very difficilut to pick the top in any bull run.

My advice would definitely be jump on board and get out when the trend collapses.

To the original OP - by far and away the easiest way to invest in them is through a spreadbetting company such as worldspreads or deltaindex.


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## mickman (23 Apr 2008)

jim rogers and george soros have been saying since the 1980's that the US economy is going to collapse and to stay away from US equities, since the 1980's we all know that US equities have risen a lot. 

boon pickens said about 2months ago that he was short on oil as it was going to go to 90 dollars or below. it then went to 110 and a week ago he reversed his position and went long - why wont he be wrong again??

oil is only flying up mostly cos of the dollars decline - if the fed dont cut rates next week then watch oil come down - mark my words. gold has already topped.

commodites are too volatile for most people in invest in - my opinion for the original poster of this thread is to invest in ag companies i.e. monsanto, potash etc if he wants exposure to commodities. 

the market always corrects when everyone is going around picking the next high price for a trade i.e. oil at 150 etc. thats the most dangerous time to invest, all experienced traders know this.


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## mickman (23 Apr 2008)

boon pickens also said that his position was a " mistake on his part"  legendary trader my ass


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## z106 (23 Apr 2008)

mickman said:


> boon pickens also said that his position was a " mistake on his part" legendary trader my ass


 
Yes - you are right - he did reverse his position.

That said - the guy has made SERIOUS cash in investing in energies over the years.
Successful traders are nevr right all the time. It's about what they make when they are right versus what they lose when they are wrong.

WIth respect to yourself mickman - you ridiculing boon pickens for his ability to trade energy cannot be taken too seriosuly.

I'll probably give boon teh benefit of the doubt over you on this one if you don't mind.


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## z106 (23 Apr 2008)

mickman said:


> jim rogers and george soros have been saying since the 1980's that the US economy is going to collapse and to stay away from US equities, since the 1980's we all know that US equities have risen a lot.


 
Ok - so you're having a go at jim rogers and george soros here too i see.

Out of curiosity - is there anyone out there whose opinion is probably more informed than yourself given that you seem to have no time for jim and george either ?


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## charttrader (23 Apr 2008)

mickman said:


> no offense but when people like the above is recommended by his relative "banging on about " commodites and to invest in them , its a sure sign that the rally is nearing the end. oil is at euphoric prices at the moment,



The opening post was penned in February of 2007...


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## mickman (23 Apr 2008)

im having a go at thes people who come on television saying this is going to happen and that is going to happen. as you say all traders are wrong some of the time, so why go on tv and give their opinions to the world when they could be wrong, lots of new people starting in the markets will be influence by them and copy their positions only to get burned.
i have learnt the hard way not to listen to cnbc interviews or bloomberg etc. sometimes i listen for a laugh . for instance there was an oil "expert" on the other day saying that he thought oil could go to 120 dollars in 3 months, what happened?? it hit 119.80 in three days. most of these guys dont have a clue.

i have great respect for these traders , but the traders you mention here i.e. pickens etc made huge sums of money in the 1970/80 commodity bull market. inflation was rampant and markets were going limit up for weeks in a row. its easy to make money in markets like that, just the same as it was easy to make money in oil over the past 5 years. 
im just saying that in my opinion the dollar will not be ALLOWED to fall forever, if it goes to 1.70 then a dollar support program will be put in place and oil will fall heavily


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## mickman (23 Apr 2008)

i meant above that i have great respect for soros etc


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## NikolazTesla (23 Apr 2008)

mickman said:


> i meant above that i have great respect for soros etc


 
Good on you mm, you speak what is on your mind.

If one wants to play long term gambles, then that is their own decision, and they must accept what happens, good or bad.

If one has an option to play short term gambles, that are less risky, and can yield much better results, then one should consider this option seriously.

My opinion is that they are all a bunch of, oh, I better not say it, I nearly forgot myself there for a moment.

Your best advisor is straight in the mirror in front of you, but many fail to see him/her 

Research, study, practice, change, study, practice, change - and eventually it will click!

Notice how the research does not repeat like the other aspects.


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## Elphaba (25 Apr 2008)

Ive just been reading this thread with interest and sorry for butting in but Im about to switch my pension to Eagle star global commodities fund, after having done some research. (74% energy, 13% agriculture, 7% metals, 4% livestock, 2% precious metals.) It is a unit linked fund, but can someone explain this in very simple terms? If I was paying 100 euro in every month, does this mean I'd be buying 100 units say at 50-60 cent and then when market recovers the unit price will go up?


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## mickman (25 Apr 2008)

do you not think investing your whole pension in commodites is a bit of a risk??


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## Elphaba (25 Apr 2008)

The fund allows you to switch, so I can keep a close eye on it. There is nothing else I believe is worth investing in. I reckon the short supply of commodities (food and oil)and the huge demand is only just beginning. Recent food riots, recent attack on nigerian pipeline, demand for metals from chindia, I could go on and on. Growing more biofuels will continue to affect the price of grain....I will investigate other options...but can you explain what Unit linked means in simple terms??I've been trying to decipher Wilkes post, but I'd need a degree. Thanks


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## mickman (26 Apr 2008)

Each contribution buys a number of units at a price, which reflects the value of the assets in the fund, which could be stocks and shares, property etc.


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## mickman (26 Apr 2008)

the price of a unit could be 10 euro, if u put 100 in, you buy ten units.


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## mickman (26 Apr 2008)

by the way if u did 50 - 50 with equities i think ud b better off.


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## Elphaba (26 Apr 2008)

so if the unit price reflects value of stocks, shares etc in the fund and for example 100 euro buys me 10 units, its fair to say the units I buy can increase if the the market recovers, (and also go the other way)

The reason I like commodities they are tangible, since they are a world neccesity, there will always be a demand for energy and food. Equities trickier, but I'm surprised at how well some irish food companies are doing at the moment. Eagle star pension funds received money mate awards and they are transparent, with charges etc and you can track them online with your pin and switch to other funds and their min contribution is 30 euro! 

I'll be transfering money from an old pension into it and believe this can take up to six weeks! If anyone knew the ideal fund we'd all be investing in it, My ideal fund would be a 10 million sitting in the bank and live off the interest


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## mickman (30 Apr 2008)

look at rabodirect too. they have exposure to oppenheim funds which have consistently outperformed the rest. 

you are right when you say if the market goes up the value of your units go up. its just a technical term really. 

there will always be demande for equities too i.e. big companies dont just go under and stop trading . the price of oil went to 10 dollars a barrel a decade ago, why coudl it not happen again??

US equities look very good at the moment

by the way for other posters the "legendary" boone pickens was on cnbc again last nite saying that oil is going to 150 even though a few months back it was going to 80 - a senile old man


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## raven (30 Apr 2008)

Some interesting stuff on radio 1 this morning. One commentator was asserting that a commodity bubble had formed and prices are nearing a correction. Said he was expecting oil prices to fall 20-30% in the near to medium future back to a more sustainable level. Felt the same  was true of commodities on a general level. His argument was that the  there are far more speculators involved in commodities at the moment than "normal", hence creating artificial price inflation, (ie. some underlying shortages are grossly exaggerated by speculation).


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## Elphaba (30 Apr 2008)

Governments profit bigtime out of oil in taxes; recent truckers strike in U.K.
Bush annouced huge tax incentives for oil companies. I dont see price of oil correcting anytime soon, and I think it will hit 150 a barrel which is good for investors but very bad for the general economy. Eagle Star have another fund which is less heavily weighted in oil, the Earth resources fund, I think
spreads the risk more evenly, 25% agriculture -(coffee, sugar etc), 
24% precious metals, 27% alternative energy, with only 24% in oil.
If a fund is transacted in dollars, does that mean the units are purchased in dollars. So my euros would buy more dollars, does anybody know?


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## mickman (1 May 2008)

yes the units will be priced in dollars - dont bank on the dollar staying at the level its at now for much longer though


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## Elphaba (1 May 2008)

Thanks Mickman. I think the feds rate cut will be last, but at least 6 months to a year before dollar starts to recover.


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## joe sod (1 May 2008)

raven said:


> Some interesting stuff on radio 1 this morning. One commentator was asserting that a commodity bubble had formed and prices are nearing a correction. Said he was expecting oil prices to fall 20-30% in the near to medium future back to a more sustainable level. Felt the same was true of commodities on a general level. His argument was that the there are far more speculators involved in commodities at the moment than "normal", hence creating artificial price inflation, (ie. some underlying shortages are grossly exaggerated by speculation).


 
I agree with this oil is long due a big correction, it has been more or less straight up for the last 6 months, alot of it is to do with money leaving financials and equities and trying to ride the commodity wave (as it is the only thing going up), therefore there is alot more to it than just supply and demand, the same true for food, an awful lot of speculative money involved, i think oil could fall back down to 80/90 a barrel, i also think the dollar has stabilised for now


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