Natural-Resource Equities Could Provide Better Inflation Hedge than
Commodities, According to The Boston Company Asset Management
BNY Mellon Investment Boutique Sees Rates Rising
NEW YORK, May 7, 2014
NEW YORK, May 7, 2014 /PRNewswire/ --Natural-resource equities could provide
a better hedge against inflation than commodities themselves, according to a
white paper from The Boston Company Asset Management, LLC (TBCAM), the
Boston-based equity investment boutique of BNY Mellon.
This could be a particularly appropriate time to consider strategies that
hedge against a rise in inflation as interest rates appear to have bottomed,
the report said. It notes that an increase in the federal funds rate could
come as early as the spring of 2015, which could spark a rise in inflation.
TBCAM warns that investors may wish to prepare for inflation despite concerns
from the International Monetary Fund and U.S. Federal Reserve that inflation
is too low. Such concerns may prompt central banks to add even more stimulus
through quantitative easing and negative real rates, said Robin Wehbe, author
of the report and portfolio manager for TBCAM.
"Preparing for the eventual transformation of stimulus into excess liquidity
is paramount," Wehbe said. The report, Inflation Investment Guide: The
Advantage of Natural-Resource Equities Allocation, posits that
natural-resource equities may provide inflation-hedging benefits without
significantly reducing the performance of an investment portfolio in
pre-inflationary time periods. Equities, natural resource equities and
commodities perform differently across different inflation regimes, the report
"In times of low to moderate inflation, equities typically are the clear
outperformer," said Wehbe. "However, natural-resource equities have
historically caught up and eventually overtaken the broader stock market to
turn in the best returns as inflation begins to rise. Commodities tend to
lag all equities in almost every inflationary environment, only outperforming
the broad market in times of very high inflation."
Rising U.S. interest rates contribute to a strengthening U.S. dollar and could
drive inflationary pressures around the world, the report said. Countries
with current account deficits will feel these pressures the most, according to
TBCAM. The report notes that concerns about inflation have been blamed for the
sell-off in emerging markets over the last year.
"It's important to remember that commodities have an expected return of zero,"
said Wehbe. "If you look at the historical return of commodities against
other asset classes, such as equities, you'll see that they have significantly
The report is available at TBCAM's web site:
Notes to Editors:
The Boston Company Asset Management, LLC, a BNY Mellon Investment Management
boutique, provides active equity investment-management services for corporate,
public, mutual funds and union sponsored and jointly trusteed retirement
plans, endowments and foundations. Assets are managed by The Boston Company
as well as its personnel acting as dual officers of either The Dreyfus
Corporation or The Bank of New York Mellon.
BNY Mellon Investment Management is one of the world's leading investment
management organizations and one of the top U.S. wealth managers, with $1.6
trillion in assets under management. It encompasses BNY Mellon's affiliated
investment management firms, wealth management services and global
distribution companies. More information can be found at www.bnymellon.com.
BNY Mellon is a global investments company dedicated to helping its clients
manage and service their financial assets throughout the investment lifecycle.
Whether providing financial services for institutions, corporations or
individual investors, BNY Mellon delivers informed investment management and
investment services in 35 countries and more than 100 markets. As of March 31,
2014, BNY Mellon had $27.9 trillion in assets under custody and/or
administration, and $1.6 trillion in assets under management. BNY Mellon can
act as a single point of contact for clients looking to create, trade, hold,
manage, service, distribute or restructure investments. BNY Mellon is the
corporate brand of The Bank of New York Mellon Corporation (NYSE: BK).
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All information source BNY Mellon as of March 31, 2014. This press release is
qualified for issuance in the US only and is for information purposes only. It
does not constitute an offer or solicitation of securities or investment
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construed as investment advice. Past performance is not a guide to future
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Contact: Mike Dunn
+1 212 922 7859
SOURCE BNY Mellon
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