"We have seen significant interest from clients in using commodities to hedge against inflation", Co-Lead Portfolio Manager, Christopher Burton, added. "Institutional investors recognize that amid reduced liquidity in many alternative investments, the commodity futures markets have remained liquid with transparent pricing. While Treasury Inflation Protected Securities (TIPS) also offer investors inflation protection, the duration component of these securities may hurt these investors if there is a selloff in US government bonds."
Overall, commodities prices fell sharply mid-month but recovered at month end. Several commodities posted healthy returns for the month, including Sugar, which was February’s strongest performer, gaining 5.95% on news of India’s decline in production as well as increased demand from ethanol manufacturers. Silver continued a four month positive streak, gaining 4.11% on investor demand based on its perceived safety. Cotton suffered the most, falling 14.24% on fears of declining global demand as well as pressure from a strengthening US dollar.