One of the UK’s largest public pension funds has decided to invest in the commodity market, at a time when prices — driven by oil — have been on an upward trend since the start of 2016, FN reports. NEST, which manages pension fund money for six million members, said on Wednesday that it is looking for an actively-managed commodities fund. This would be added to a roster that includes high-yield bonds, emerging market debt and property, as well as more conventional stock and bond investments. Commodities look attractive relative to their long-term historic prices.
As the world’s population grows and incomes in the developing world rise, we expect increasing demand for commodities. We want our members to benefit from these long-term trends. John St Hill NEST, Deputy chief investment officer Commodity prices, led by oil, have been on an upward trend since the start of 2016 as the global economic recovery has gathered pace. The S&P GSCI index, one of the most widely-followed commodity indexes, has risen 41% since then. However, this followed a long period of less impressive returns, stretching back to the financial crash of 2008. In June of that year the oil price reached $157 a barrel, but crashed to $51 by the following March. It climbed back above $100 by 2014 but then dropped sharply again that year and is now at around $68.
Nest did not indicate the size of its planned commodity investment, but it is likely to be a small proportion of the overall fund. Nevertheless, the announcement will be a fillip for fund managers marketing such strategies, as the public pension fund is an influential investor in the UK.
