Commodities have soared over the last 12 months, with the Bloomberg Commodity index jumping 27%, the top performance in years. And Barron’s thinks they have more room to rise.
“Commodities sit at the crossroads of three of today’s biggest investment themes—rising inflation, a changing China, and the transition away from fossil fuels amid increased attention to climate change,” wrote Barron’s correspondent Reshma Kapadia.
In particular, he cited the potential for oil and agricultural commodities such as corn. U.S. crude prices have shot up 50% in the past year, recently trading at $78.23.
But after the big general surge in commodities, investors need to be choosy, Barron’s says. Kapadia cites three actively managed mutual funds as opportunities: the $7.3 billion Pimco Commodity Real Return Strategy fund (PCRAX) - Get PIMCO Commodity Real Ret Str A Report, the $1.6 billion BlackRock Commodity Strategies fund (BCSAX) - Get BlackRock Commodity Strategies A Report and the $507 million Columbia Commodity Strategy fund (CCSAX) - Get Columbia Commodity Strategy A Report.
Morningstar analyst Bobby Blue rates the Pimco fund as silver for its least expensive classes and bronze for its three most expensive, including BCSAX. That has an expense ratio of 1.27%. Morningstar’s highest rating is gold.
“Pimco Commodity Real Return offers investors broad commodities exposure, with well-placed tactical bets,” he wrote last year. “The [management] team here provides excellent oversight.”
The fund also has “the inflation-hedging advantages of U.S. Treasury Inflation-Protected Securities managed by Pimco’s strong Real Return team,” he said.
A Morningstar automated process rates the BlackRock fund as silver. “A strong management team and sound investment process underpin,” the rating, the research firm said.