In this feature Nicolas Robin, co-manager of the Threadneedle (Lux) Enhanced Commodities Fund discusses how to deal with and reduce the impact of contango and the cost of carry; although commodities are tagged as being "very liquid" why this liquidity is uneven along the curve; whether there is a disconnect between the fundamentals and the prices commodities are trading at; why he doesn't use the word "bubble"...
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Q1 - Commodity volatility is here to stay - exploiting it to capture performance
Geopolitical risk is here to stay
The cost of insurance (i.e. implied volatility) is pretty low - in fact, there is a dichotomy
Q2 - Fighting contango
Reduce the cost of carry vs. flattening of the curve/ backwardation
Q3 - Is there a disconnect between the fundamentals and commodity prices?
Q4 - From a historical perspective which commodities are in a "bubble" and the role of the USD?
Q5 - How should investors be positioned in the energy, agriculture complex?