[Real Investment] 'The Era of Recovery' Comes... Should You Join a Commodity Investment Fund?

Promising New Year Funds
Commodity Funds and Natural Resource Funds
YTD Returns of 4.6% and 10.3%
Rapid Rise in Grain Prices Including Soybeans
Socially Responsible Investment ESG Also Worth Watching

[Asia Economy Reporter Park Jihwan] This year in the fund market, Environmental, Social, and Governance (ESG) funds, which have rapidly emerged as a new investment trend, and commodity investment funds, which are expected to enter a major price uptrend, are forecasted to be promising. Especially when focusing on the post-COVID-19 economic situation, the investment trend emphasizing corporate social responsibility and the policies of various countries for economic recovery have led to a situation where commodity demand exceeds supply, benefiting funds investing in related assets.

◇Expectations for Economic Recovery... Commodity Investment Returns Soar=Since the beginning of this year, commodity prices such as crude oil and minerals have risen sharply due to expectations of economic recovery, resulting in strong returns for public offering funds and exchange-traded funds (ETFs) investing in related underlying assets. According to financial information provider FnGuide as of the 8th, commodity funds and natural resource funds investing in crude oil, energy companies, and copper have posted year-to-date returns of 4.69% and 10.37%, respectively. Expanding the period to three months, the returns were 14.69% and 29.37%.

It is analyzed that commodity prices rose due to economic stimulus measures in major countries like the U.S. after the COVID-19 pandemic, leading to strong returns for these funds. In fact, the international commodity price index plummeted in March-April last year with the spread of COVID-19 but quickly rebounded afterward, with most prices exceeding pre-crisis levels. Crude oil has been on an upward trend since November last year, currently reaching the $60 per barrel range (Brent crude), and non-ferrous metals have been rising since May last year. Copper prices recently surpassed $8,000 per ton, marking the highest level since February 2013. Above all, these commodity prices are expected to rise further as COVID-19 vaccines become commercially available and major countries like the U.S. implement economic stimulus measures in earnest. The Bank of Korea recently stated in its report on the background and outlook of international commodity price increases that "international commodity prices will continue to rise significantly influenced by global economic recovery and risk asset preference."

Grain prices, especially soybeans, have also shown a sharp rise since August last year, leading agricultural commodity funds to maintain steady returns. Agricultural commodity funds recorded a 7.63% return this year. The securities industry expects the strong grain prices to continue this year. The causes of rising grain prices include ongoing global abnormal weather phenomena and market conditions where demand exceeds supply, such as the recovery of China's pig farming industry.

◇ESG Funds Flying Above the KOSPI=There is also a way to achieve outstanding returns by investing in good companies. Recently, ESG investment, which has rapidly grown as corporate social responsibility has become more important, is that method. ESG investment means reflecting non-financial performance such as Environment, Social, and Governance, along with a company's financial performance, in investment decision-making.

Recently, the assets under management of Socially Responsible Investment (SRI) funds, including ESG, have surged. SRI fund assets increased nearly sixfold from 256.9 billion KRW a year ago to 1.5238 trillion KRW as of the 8th. The number of managed funds also rose sharply from 29 to 51 during the same period. With the domestic Korean New Deal policy and U.S. President Joe Biden's green policies gaining momentum, global interest in ESG investment is expected to continue.

Returns are also excellent. Looking at the returns of ESG ETFs listed on the KOSPI, ESG investment profitability outperforms the market returns. Comparing the returns over the past three months with the KOSPI's rise, six out of seven products exceeded the KOSPI's return. During this period, the KOSPI rose 26.32%, while ‘KODEX 200ESG’ increased by 33.18%, recording the highest return. Most related products posted returns exceeding 30%, outperforming the KOSPI's 20% range.

This content was produced with the assistance of AI translation services.