United Commodities Plus Fund

With all the hype on commodities the past few months, interested investors have an ever increasing number of options to participate in the commodities bull run so frequently mentioned by Jim Rogers.

I recieved a pamphlet on the above fund together with my CPF statement recently. What makes this different from the other commodity funds is that it includes a TIPS component, meaning that the fund could invest in US bonds which are tied to the Consumer Price Index, helping fight inflation along the way.

But everyone should have realised that government released statistics don't necessarily reflect sentiments on the ground.

Anyway, what caught my eye in the pamphlet was this:

The Fund’s portfolio will be re-balanced every six months, based on a 40-30-20-10 mix, with the best-performing one allocated 40% and the worst-performing one allocated 10%.

It seems to me that this strategy is strongly dependent on a trending market, which is good since commodities do appear to be moving up (though not steadily). However, it is not without its' trade-offs. In a non-trending environment where prices hits a high and retreats, be prepared that UOB Asset Management will be buying high and selling low.

If you're wondering, I'm not subscribing to this. I inherently prefer putting my working capital into a commodity index fund.