Almost eight out of 10 (78 per cent) of pension funds expect markets to enter a commodity “super cycle” with the price of precious and industrial metals trading above their long-term price trend, according to new research.
The research, from NTree, looked at UK pension funds with assets under management of $76bn (£53.6bn). It said many expected to go overweight in commodities over the next 12 months as a result.
The price of many commodities – including metals and oil – have been particularly hit by the global slowdown caused by the coronavirus pandemic. Demand has also been affected by increased awareness and adoption of ESG strategies which may look to limit carbon emissions and investment in fossil fuel driven industries.
However, the research found that over the next year 64 per cent of UK pension funds expect to go overweight in their allocation to gold, whilst 42 per cent expect to be overweight silver.
In terms of industrial metals, platinum group metals continue to be an area of interest for investors with 46 per cent of pension funds expecting to go overweight in platinum and 46 per cent expecting to increase their allocation to palladium.
It also found base industrial metals are also starting to attract increasing interest with 40 per cent of funds looking to increase their allocation to the nickel whilst 46 per cent are also looking to overweight their exposure to copper.
In addition, UK pension funds are also likely to increase their exposure to China, a key consumer of commodities and driver of global industrial production.
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