Have you considered soybeans for your portfolio?
The Dynamic Markets Fund (Hedge Fund) ASX: DMKT offers exposure to what we see as mispriced investments in a wide range of markets, from all over the world.
By picking markets, rather than individual companies, we can look at the market as a whole, rather than spending time understanding and researching the details of a particular company which allows us to be quick with our implementation of an opportunity. Our approach is also cost effective as we implement positions using passive low-cost ETFs and futures.
This global diversified approach means that DMKT can be used in a number of different ways in an investor’s portfolio. It can be used as a whole of portfolio solution or as the core of a diversified portfolio complemented by satellite holdings that are focused on stock selection or alternative assets.
Healthy returns from soybeans
When it comes to commodities, one of the opportunities our broad investment universe presents is the ability to invest at the individual commodity level, rather than at the index level.
There’s often a great deal of disparity among individual commodities, which creates lots of opportunity to add value – as opposed to many commodity indices, which are heavily dominated by energy commodities like oil.
When we started looking at soybeans, there were several factors that highlighted the mispricing:
- Attractive valuation – the price of soybean futures was below the cost of soybean production, which meant there was inherent value in buying futures.
- Favourable demand/supply – the global soybean ‘stocks-to-use’ ratio was at its lowest level in two years, indicating there was only minimal excess supply to satisfy any future increase in demand.
- Weak sentiment – measures of sentiment toward soybeans were also at their lowest levels in years. Given the DAA process looks at sentiment in a contrarian manner to take advantage of herd mentality, soybean sentiment being at bearish extremes was a positive sign that we could be at the bottom in soybean prices.
We invested in April 2016 and exited in June 2016, following a strong 38 per cent rally in soybean prices.
On a small portfolio allocation, this added over 30bps to performance in just a few months.
DMKT's investment in soybeans demonstrates the global growth opportunities available for SMSFs.
About the author
Sam Amora, is the investment strategist and assistant portfolio manager of the Dynamic Markets Fund.
Access up to 80 global opportunities in a single trade
In a world where market volatility and low growth are the new norm, asset allocation is more important than ever. However accessing asset classes globally and outside of the usual places in order to do this is difficult.
AMP Capital’s Dynamic Markets Fund (Hedge Fund) ASX Code: DMKT, an exchange traded managed fund, offers a low cost solution to global portfolio diversification with a real return objective.