GLOBAL - Soaring global food prices and the search for diversification against equity and fixed interest market downturns have prompted investors to turn their attention to commodities as a separate asset class, a report by institutional fund manager QIC has shown.
QIC said this had been led by a 130% surge in wheat prices and a 190% increase in corn and rice prices, despite recent financial market turmoil and a slowdown in advanced economies.
Adriaan Ryder, QIC managing director strategy, said those factors had fuelled a growing interest in commodities as a separate asset class and the benefits that exposure to commodities created in an investment portfolio.
He explained: "Commodities provide diversification benefits as historically they have a low correlation to other asset classes and a high correlation to inflation.
"At the early stages of a recession or economic downturn when both shares and bonds have been negative, returns on commodities have been positive."
The QIC Red Paper also predicted the outlook for food prices over the medium term was for prices to remain above their longer term average.
Ryder added there remained a number of factors driving food price increases, such as continued strong global demand for commodity staples, surging oil prices due to increasing demand for biofuel production, drought-impacted harvests and rising inflation.
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