Commodities not your run-of-the-mill hedge: Highbridge PM

Raw materials also offer inflation protection and exposure to emerging economies, says Nodelman

Apr 24, 2012 @ 12:29 pm

By Jeff Benjamin

Still on the fence about commodities? Mark Nodelman, a portfolio manager who leads the commodities investing team at Highbridge Capital Management LLC, a $25 billion asset management firm, said there are a number of reasons to invest in raw materials. At the top of the list: diversification, inflation protection and exposure to emerging economies

Speaking on Tuesday in Washington, D.C., at the Investment Management Consultants Association's annual conference, Mr. Nodelman emphasized broad market exposure and a strict focus on risk management.

He also said that commodities function as a portfolio diversifier, noting: "Historically, commodities have had very unstable correlation to broader asset classes, from negative to positive." He added: "In a major economic or political event, commodities may respond differently than your overall portfolio."

Commodities are seen as an inflation hedge, he explained, because "they tend to be positively correlated to inflation, while fixed income and equities don't do as well during an inflationary period."

Even though the pace of growth in some of the emerging economies has slowed recently, Mr. Nodelman cited that fact that most economists still see the long-term trend toward global growth. If that's the case, he said, commodities exposure is the most direct way to tap into it.

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