Zenith Portfolio Strategies assesses macro economic indicators and how they affect various asset classes. For any portfolio manager or investment committee that is vetting the commodity complex for continued or potential inclusion into your asset mix, it is important to be confident in the return drivers. With inflation at the forefront of investment concerns, it is important to look and examine any commodity exposure and its true responsiveness to inflation.

Commodities as inflation protection. Deutsche Bank DBC and Pimco PCRIX have returned approximately neg 9.56% and -13.70% over the last year while CPI measured inflation has been ticking positive for the year. I know these are touted as inflation hedges but that return is no hedge at all. Take a look under the hood and determine if they truly are giving you the inflation protection they claim.

Zenith does not see a tight correlation between CPI and steady performance from either of these products. We would look elsewhere and as we find a reasonable substitute, we will post.

Tom Koehler, CFA

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