Commodities: Offense Sells Tickets, but Defense Wins Championships

ETF Pulse

As inflation risks re-emerge in 2025 and market uncertainty persists, investors are revisiting commodity exposure – but are they looking in the right place?

The go-to “hedges” like gold and treasury inflation-protected securities (TIPS) have historically fallen short when inflation pressures materialized. Instead, the most resilient performance has come from diversified, risk-managed commodity strategies, like the one employed in CI Auspice Broad Commodity Fund (CCOM).

Gold and TIPS: misunderstood inflation hedges

Looking at the past five years – split into an inflationary period followed by a disinflationary one (see two images below) – traditional hedges like TIPS and gold underwhelmed when they were needed most.

• TIPS were the weakest performer through both inflation and disinflation.
• Gold lagged during the inflation surge, then performed well during disinflation, alongside equities, Bitcoin, and other risk assets.

We aren’t negative on gold – it remains one of many commodities CCOM can be exposed to when price trends are favourable. It can do well as a “risk-off” trade during periods of uncertainty, as exhibited over the last year, and in H1 2020 before inflation started to rise. But data suggests it’s not the reliable inflation hedge many assume. The same goes for TIPS, which have shown limited effectiveness and inconsistent impact in most portfolios.

Source: St. Louis Fred. As at March 31, 2025. Chart shows year-over-year % change in inflation (U.S. CPI)

Source: Morningstar Direct. As at March 31 2025

A better way to access commodities: diversified and tactical

Commodity cycles are complex. Each year can bring a different theme:

• 2020 – Gold rallied during COVID’s onset but then stagnated for two years.
• 2021 – ESG-linked trades like lithium and copper surged, only to correct deeply.
• 2022 – Energy-reversed ESG trends, outperforming solar and EV-related themes.
• 2023 - 2024 – Having traded sideways for years, uranium and related stocks finally delivered performance, capturing investor sentiment and flows. In 2025, they have corrected.
• 2025 – Following three years of consolidation, gold and silver finally recaptured headlines and investor sentiment. Gold has reached all-time highs while silver too has been strong.

These rotations highlight why a diversified, trend-driven strategy like CCOM's is critical. The goal is not to time the next commodity story, but to stay exposed to the right ones, at the right time, using a rules-based, long/flat approach that adapts as trends evolve.

What sets CCOM apart?

CI Auspice Broad Commodity Fund (CCOM) tracks the Auspice Broad Commodity Index, a rules- based index that tactically allocates across 12 core commodities in energy, metals, and agriculture. The strategy is built for both offense and defense:

• Participation in upside via long positions in trending markets.
• Capital preservation by shifting to cash when trends fade – this flat positioning helps reduce drawdowns compared to traditional long-only commodity exposures.

Since inception, the index has outperformed traditional benchmarks like the Bloomberg “BCOM” and Goldman Sachs “GSCI” commodity indexes by over 3% annualized, with lower volatility and smaller drawdowns.

Performance perspective: long-term metrics

Since 2000, Auspice Broad Commodity Index (the strategy behind CCOM) has outperformed gold, as well as, other popular broad commodity indexes, with less volatility. While gold’s recent run has been strong, long-term data shows that diversified commodities offer superior risk-adjusted returns, with much lower correlation to traditional equities.

The Auspice Broad Commodity Index, which CCOM tracks, has maintained a low correlation to the SCP 500 (~0.16) and to gold (~0.42), making it a powerful diversifier when equity or bond volatility rises.

Source: Morningstar Direct. As at March 31, 2025. All returns are converted to CAD
Returns of the Index do not represent the ETF’s returns. An investor cannot invest directly in the Index. Performance of the ETF is expected to be lower than the performance of the Index.

Final takeaway

With gold’s impressive rally last year and into 2025, markets may be excited by the lustre of gold right now, but as we've seen repeatedly, it’s risk management and a good strategy – not performance chasing – that wins out over the long term. Like investing in equities, buying just one commodity comes with significant risk, and performance chasing can lead to disappointing returns.

CCOM provides a disciplined, adaptable approach – participating in commodity rallies when they occur, and stepping aside when they don’t. In today’s environment of inflation uncertainty and rising volatility, that kind of tactical offense paired with downside risk management, can be exactly what portfolios need.

Glossary:

Correlation: A statistical measure of how two securities move in relation to one another. Positive correlation indicates similar movements, up or down, while negative correlation indicates opposite movements (when one rises, the other falls).

Drawdown: Measures the peak-to-trough decline of an investment or, in other words, the difference between the highest and lowest price over a given timeframe.

Liquidity: The degree to which an asset or security can be quickly bought or sold in the market without affecting the asset’s price. Cash is considered to be the most liquid asset, while things like fine art or rare books would be relatively illiquid.

Sharpe Ratio: A risk-adjusted return measure calculated by using standard deviation and excess return to determine reward per unit of risk. The higher the Sharpe Ratio, the better the portfolio's historical risk-adjusted performance.

Volatility: Measures how much the price of a security, derivative, or index fluctuates. The most commonly used measure of volatility when it comes to investment funds is standard deviation.