Commodities: Commodities are things of value, of uniform quality, that are produced in large quantities by many different producers, the items from different producers are considered equivalent. A commodity is anything for which there is demand, but which is supplied without qualitative differentiation across markets. It is a substance or a product that can be traded in large quantities. Commodities can be classified into: Precious Metals: Gold, Silver, Platinum: Other Metals: Nickel, Aluminum, Copper, Zinc, Agro-Based Commodities: Wheat, Rice, Corn, Cotton, Oils, Oilseeds, Soft Commodities: Coffee, Cocoa, Sugar. Petrochemicals: High Density Polyethylene, Polypropylene, Energy: Crude Oil, Natural Gas, Gasoline, etc.
The Commodity Market: The Commodity Market is an ecosystem where commodities are bought and sold. These are markets where primary and raw materials are exchanged. Raw materials are bought or sold in standardized contracts on regulated commodities exchanges. In contrast to an equity market, where shares are bought and sold, commodities are bought and sold instead. Soybean, maize, sorghum, paddy rice, cashew nut, and cocoa are examples of agricultural products that are traded on an exchange. The COVID-19 pandemic’s breakout showed the fragile nature of food systems, particularly in Africa, among other things. It became crucial for national governments to address issues along the agricultural value chain in their respective nation-states.
Acute food insecurity is becoming more prevalent in many nations, undoing years of progress in development. The impact is anticipated to extend through 2021, into 2022, and potentially beyond, affecting vulnerable households in practically every nation. National governments now have the responsibility of creating an inclusive, sustainable food system that boosts revenue, particularly for farmers.
Historical view of commodities as an asset Class: Studies by Friederike Erhorn in 2008 shows that Due to its distinct characteristics and a history of significant volatility and risk, many investors historically avoided investing in commodities. Additional factors for investors’ lack of interest include the poor performance of most commodities since the start of the 1980s and, in contrast, the strong stock market performance.
But during the last few years, commodities as traded assets have drawn more and more attention. As an illustration, the estimated long-term investor capital associated with the S&P GSCI and comparable products topped $130 billion in 2007, up from roughly $2 billion in 1996. More specifically, from $8 billion in 2000 to more than $25 billion as of September 2004, the GSCI grew its investments. As a result, from 50 institutions globally exposed to the GSCI in 2000 to an estimated 150 institutions globally. The Dow Jones-AIG Commodity Index (DJ-AIG) was linked to an additional $8 to $10 billion in assets, up from just $200 million a few years earlier. Additionally, according to estimates from December 2004, mutual and pension funds raised their holdings in commodity indexes from roughly $15 billion in the middle of 2003 to $40 billion at the end of 2004. Additionally, the Harvard University Endowment, which is often seen as a sign of forward-thinking institutional portfolio management, had already committed 13% of its 2004 assets, or just under $3 billion of its $22.6 billion endowment, to the commodity sector.
Peculiarities of Commodities as an asset Class: Commodities have been thoroughly examined in a number of recent scholarly articles; as a result, the benefits of commodities as an asset class have become empirically clear. Several scholars discovered that over time, commodities showed little to no association, if any, with the returns on stocks and bonds and that they are, as historical evidence suggests, a hedge against inflation. These traits are thought to make commodities beneficial for diversification across market situations by lowering volatility and generating greater returns when they are most required. Additionally, proponents of commodities as an asset class assert that a diversified commodities portfolio has produced average excess returns that are comparable to those of equities and has attained the same risk premium as the S&P 500. Due to the distinctive characteristics of commodities, the bullish outlook for this asset class over the coming ten years, record-high commodity prices, and investors’ dissatisfaction with the stock market’s performance have all contributed to an increase in investor interest in commodities.
Marble Commodities Fund: In an effort to provide investors with opportunity to invest in commodities as an alternative asset class, Marble Capital Limited has completed the development of the Marble Halal Commodities Fund (MHCF), The first ever commodities fund in Nigeria governed by the Securities and Exchange Commission (SEC). In addition to the SEC’s oversight, the participation of other transaction parties, such as the well regarded and seasoned Stanbic IBTC Trustees, FSDH Merchant Bank, and CardinalStone Registrars in the Nigerian Capital Market, contributes to the fund’s anticipated favorable performance.
The Marble Halal Commodities Fund is an open-ended mutual fund that invests in Shari’ah-compliant securitized commodities, commodity-linked fixed income instruments and commodity-linked equities listed on Exchanges licensed by the Securities & Exchange Commission (SEC). The primary objective of the fund is to provide investors with portfolio diversification and capital appreciation by taking advantage of the various offerings of the Nigerian commodity space. Investors who seek investment options that align with their beliefs and ethical standards have found commodities to be a viable alternative investment over the years. The Shariah Advisory experts of the fund have conducted a thorough screening of the Fund, which has been approved by the Securities and Exchange Commission. The returns of The Fund will depend solely on market conditions, and returns would be shared to Unit Holders based on their holdings’ performance. Advantages of the fund include diversified Portfolio, alternative Investment Option, medium Risk with Moderate Returns, open ended & easy entry easy exit
Because the MHCF has a Securities and Exchange Commission (SEC) license and complies with Nigerian Pension Commission regulations, investment is open to both individual and institutional investors. The MHCF provides an opportunity for everybody who is interested to take part without rejecting anyone based on their views. A unit of the fund can be purchased at launch for 100 Naira with a minimum subscription requirement of 500 units (50,000 Naira). It will be listed on an exchange liquidity facility that has received SEC approval and can be redeemed in 5 working days. Visit www.marblecapitalltd.com/marble-halal-funds/ to get started.