Why a commodity headline is not a fund return

What is going on

Futures curves move between upward-sloping and downward-sloping shapes as inventories and financing change. Funds that roll from a near contract to a later one realise that shape as a gain or a cost. Over multi-year windows the roll has been large enough, in energy in particular, to dominate the story an investor remembers from the news.

Why it matters

A portfolio that “adds commodities” should say which index of which contracts, whether collateral yield is included, and whether the exposure is a miner’s equity in disguise. Otherwise the allocation is a word. CFDs add a further gap: financing and the provider’s price source.

What to watch

Read the curve before reading a manager’s explanation of last year’s tracking difference. If the product is a single-commodity bet, size it as one.

Risks

Commodity prices are volatile and can fall for years. Roll costs can make a product a poor inflation hedge even in a period when that story is popular.