Investors seeking added asset diversification in their portfolios are increasingly finding an option in commodity indexes, according to a ThinkAdvisor report. These indexes have also become appealing as a hedge against inflation, financial advisors say.
The indexes, which include gold, oil, grain and other commodities, have drawn growing interest from many investors. Laurence Black, founder of The Index Standard Investment index tracking service, was quoted as saying there has been a trend towards commodity exposure being offered as part of fixed indexed annuities and registered index-linked annuities. Previously these products have primarily offered the S&P 500 and similar indexes.
“We have seen an increase in indices used in the annuity space that are linked to commodities,” Black said.
Analysts believe the returns on commodity indexes could rival those from bond indexes, which have declined due to higher interest rates. Commodity indexes may average 3% per year on gold indexes and about 5.5% per year on diversified commodity indexes.
In some cases, the exposure in life and annuity products may involve one particular commodity such as gold. F&G’s Hindsight 20/20 index incorporates Bank of America indexes that provide exposure to gold.
Other annuity products may offer commodity index options linked to climate change, such as the SG Smart Climate Index, which reflects the effects of climate change on commodity prices.
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