Main Bullet points:
- History of Commodities as an added-value Asset Class – Still relevant!
- Commodities are recovering: why and where are we in the current cycle of mean reversion
- In what Global Macro environments do Commodities provide the most diversification?
- Evaluating indices versus active management in the commodity asset class
Price Asset Management, LLC (“PAM”) is a Chicago based management-owned investment firm with a long history utilizing the Rogers International Commodity Index® (“RICI®”) methodology, a long only, non-leveraged global index of 37 commodities created by Jim Rogers. PAM is a member of the Rogers International Commodity Index® Committee, chaired by Jim Rogers, which governs the composition and weightings of the RICI® Index. At PAM we have extensive experience dating back to 2007 in managing various investment vehicles designed with the objective of replicating the RICI® index including a GIPS compliant composite. The RICI® has outperformed the benchmark Bloomberg Commodity Index by over 2.70 basis point compounded annually since inception in August of 1998 (before fees for both indices).
Our Thesis: Commodities, after a long and deep bear market are now more than one year off their and up approximately 15% from the bottom in February of 2016. This rally has been broad based and technically healthy. Yet prices of the components in the RICI® are on average still 50% below their highs over the past 18 years since RICI® was first created. The tremendous pressure on producers due to the prolonged downturn in prices has caused marginal production to be closed and capital expenditures slashed. Major inflection points are almost always caused by these kind of supply side changes.
The massive quantitative easing and the drive to historical lows in interest rates has benefitted equity, bond, and real estate valuations but has had the reverse effect on most of the commodity complex. Now with the potential for rates to rise, inflation expectations increasing, and fiscal stimulus in the form of global infrastructure spending replacing quantitative easing; the outlook appears decidedly positive and we believe the commodity sector should be a core allocation for most diversified portfolios and particularly over the next several years.
Mr. Konn was born in 1959. He has a BA in Psychology from Hamline University, St. Paul MN and a MBA in Finance and Accounting from UCLA. He is a senior Portfolio Manager of Uhlmann Price Securities, LLC and Uhlmann Investment Management. In 2006 Alan spearheaded the use of the Rogers International Commodity Index® methodology for use in various investment vehicles by the firm’s then affiliated Price Asset Management LLC (“PAM”). Alan became a direct owner of PAM through a management led buyout in late 2015.
Alan has spent his entire business career in the financial services industry. He joined Uhlmann Price Securities in early 2003 after spending 17 years as an investment executive with William Blair & Co. where he worked as a portfolio manager helping individuals manage and allocate their financial assets. Prior to that he worked in the corporate finance department at the First National Bank of Chicago for 2 years. Alan holds his Series 3, 7, 24,31,63 and 65 licenses and is an NFA principal.