The Morningstar Commodities Broad Basket category has fallen by more than 10% so far in 2014, to 15 October, making it the lowest-returning asset class this year.
Even more dramatically, the category is headed for its fourth annual decline.
Many commodities prices have collapsed in the past year and some, such as iron ore, are touching rock-bottom prices, causing a renewed criticism of the sector.
The natural resources equity sector is comprised of a diverse range of offerings with funds covering all the main sub-sectors, specifically energy, base metals, precious metals and agriculture, while other funds offer more restricted mandates with a narrower investment focus and relatively higher risk.
Given the niche nature of the sector, investors must tread with caution and understand that the drivers of these funds’ returns are largely exogenous.
