Iveagh: commodities next asset class to buckle

Although global equity markets have seen corrections of up to 20% in the past week, commodities could be the next asset class to fall, according to Chris Wyllie at Iveagh Private Investment House.

The firm’s chief investment officer said Iveagh’s economic indicators point to a ‘severe test’ of commodity price support levels, meaning this could be the next asset class to buckle.

In view of this, Wyllie has decreased exposure to natural resources by 50%.

Wyllie said: ‘On this basis we have tactically reduced the relevant exposures across the Iveagh Wealth fund and the Iveagh Core portfolios, exiting and halving our natural resource positions respectively, while maintaining a 5% allocation to gold.’

In the last week, gold has gone from reaching record highs above $1,900 to around $1,750 an ounce, marking a drop of $160 in two days.

Wyllie said the wealth fund remains defensively positioned amid the equity market corrections, with equity exposure of only 35%. Conversely, he added an additional option strategy should ensure the fund participates in any near-term rally.

The firm has also taken profits from its position in Australian bonds and the sale of its technology positions, to fund a larger exposure to longer duration treasuries.