Threadneedle's Stephen Thornber believes commodities like coal and copper could offer the greatest exposure to the economic recovery.
The head of Threadneedle’s global oil sector research team expects crude oil prices would remain relatively fixed at under $80 per barrel, reflecting weak demand from struggling western economies.
Although the restrictions imposed by the Organisation of Petroleum Exporting Countries (OPEC) would act to prevent further price falls, the global equity income fund manager thinks that alternative commodities would be a better short-term play for investors.
‘Near-term there may be other commodities, such as copper, coal or iron ore, with more potential for investors – oil prices are being artificially supported by Opec’s policy of limiting supply,’ Thornber explained.
‘This means there is excess capacity in the global system – any growth in demand needs to eat into this spare capacity (and inventories) before oil prices can move significantly higher in response to demand growth.’
Thornber said that the price of other commodities is more representative of underlying demand, as these have no governing organisation that acts to prevent dips in value. He pointed out that when economic conditions improve, the price of commodities like metal react accordingly and shift upwards in line with a growth in demand.
‘In other commodities, prices reflect more closely underlying demand because there is no similar producer organisation to OPEC, acting to support prices, Thornber said. 'Therefore, when economic conditions pick up, prices react more strongly to growth in demand. If an investor is confident on economic activity picking up, then other commodities may give better exposure than oil to this recovery.’
In the 12 months to the end of April, Thornber's Threadneedle Global Equity Income fund has produced total returns of 37.57%, versus a rise of 48.33% in the FTSE World index.