An Investment Fund for Commodities?

Yorkie1

Spam reported (4 posts by pimpstimes, all pimping the same article ...)

horlicksjan

bowlhead99 wrote: »

As explained, CYN is natural resources (commodities exposure), mainly equities with a high yield twist from some of the fixed interest it holds; those bits and pieces of fixed interest it holds are partially in resources businesses and partially in industrials or financials.

Most of what it holds is not fixed interest and so the yield is not as high as a proper high yield fund, it's just higher-yielding than if it had been only holding its commodity company equities.
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NCYF is a different animal and should not be on your list for commodities exposure.You probably made a mistake noting it down when someone in fact had suggested the one above. All it has in common with the above-mentioned fund is the fact it has "high yield" in the name and is managed by New City. It buys, holds and sometimes sells high yield bonds or preference shares or convertibles, and hopes to grow a bit but mainly generate a good yield.

In this respect (i.e., aiming to generate a high yield from mostly fixed-interest stuff and pay good distributions, rather than owning equities and perhaps getting more growth in good years at the expense of income), NCYF is a different beast to a general equity fund, so its movements won't be completely correlated.

However, unlike an "investment grade" bond fund, it is *not* investing in super safe low-interest bonds to get 2 or 3%. It is deliberately buying bonds and similar instruments in companies which are not super safe, super low-credit-risk companies, it wants the ones which it thinks will give a higher reward for the risk. The problem with doing this is that those riskier companies are ones which have been assessed by the market as more likely to default.

Therefore in turbulent equity markets, despite usually having a solid income, you might expect high yield funds to fall in value as companies paying back their loan interest are more likely to go bust in dodgy economic times. And when markets are going up and everyone is happier, they will likely go up too.

So, high-yield bonds like the ones held by NCYF have some characteristics in common with equities (go up a bit in good equity markets and down a bit in bad) and they also have some characteristics in common with other lower-yield fixed interest bonds (are more valuable when prevailing interest rates and inflation are low, and less valuable when rates are high).


So in summary NCYF is a high yield bond fund investing in bonds of different industries, and CYN is a natural resources fund which also happens to have some high yield bonds focussed in the natural resources sector and some in other sectors. Neither are going to move up and down at the same time or same rate as a straight equities fund nor a straight low-yield bond fund nor necessarily each other.

Doesn't mean they can't move the same distance and direction on the same day, as they will of course be influenced by global events - reduction of QE in developed markets and china at the same time, isn't good news in the short term for either of them.

bowlhead99 I am very grateful for this very detailed explanation. Thank you.

planteria

"Thank you for the suggestion. I am thinking about whether it is better to hold companies instead of funds. As I said in an earlier post my concern was doubling up as I assume I am already exposed to the major companies in my index trackers. But maybe it is still better than funds or ETFs for commodity exposure."

no prob. not really suggesting, just letting you know what i chose to do. and yes, FTSE100 has some significant exposure to commodities, for example. Latin America and Russian funds also have significant commodities exposure.

badger09

stockpeg - another alias for the spammers :mad:

Have they got nothing else to do with their sad lives :eek:

badger09

Come on guys - I could do with some here against stockpeg spammer

Tiglath

I've just hit the spam button.

badger09

yet another spammer - phoneygroup

Tiglath

Yep, reported.

Yorkie1

Now it's pamistocks folks - give that spam button some more clicks!

Yorkie1

Now the spammer's name is indexbio; please click spam.