AMP Capital NZ is to wind up its approximately $90 million Commodities Fund after nine years in operation.
Launched in 2012, the AMP Capital Commodities Fund has faced stiff market headwinds almost since launch for the alternative asset class with many investors ultimately folding after years of negative returns.
While the AMP Capital commodities strategy consistently outperformed its Bloomberg benchmark, the index returned -3.24 per cent over the five years to the end of last September and almost -10.2 per cent over the annual period.
According to the latest Melville Jessup Weaver (MJW) investment survey, since inception the AMP Commodities Fund is down -3.8 per cent. The fund has about halved in size since July 2018 when it held over $171 million.
The manager has closed the commodities product to new investment pending “completion of the wind up process”, slated for May 6 this year.
In a note to investors, AMP Capital NZ managing director, Rebekah Swan, said the commodities exit followed “a strategic review which shows that it is no longer viable to continue to run this Fund”.
Investors can cash-out of the commodities fund any time up until close-of-business May 6 (incurring a 0.15 per cent spread) when all remaining units will be redeemed.
Boutique manager, Pathfinder, also recently closed its long-running commodities fund for similar reasons. Prior to disestablishment, the Pathfinder commodities product had dropped well below $1 million in funds under management.
Ironically, the exit of the two NZ-based commodities funds from the market coincides with an uptick in the asset class itself.
The AMP Capital fund, for instance, notched up one of its best quarters in many years during the last three months of 2020, up over 10.3 per cent in the period and almost 5.5 per cent in the month of December alone. According to the September 30 fund update, the AMP Capital commodities strategy had allocated over 15 per cent to cash.
Last week Bloomberg reported the commodities sector was primed for a “consumption boom, piling pressure on precarious supply chains and boosting raw material prices” as economies emerged out of pandemic conditions.
“Commodities have been on a tear since March, and have surged to the highest level in more than six years, with rallies in everything from iron ore to soybeans, copper and corn,” the Bloomberg report says. “Goldman Sachs Group Inc., Bank of America Corp, and Ospraie Management LLC are among institutions that have endorsed raw materials as investment plays and predict they have more room to climb.”