Commodities Less Popular with Pension Funds

The WSJ reports that the largest U.S. pension funds have lost their love for commodity indexes. Just a few years ago, commodity indexes were touted as must-have in any large portfolio as  diversification and inflation protection tools. Now that some of that wisdom has been debunked, investors are not so eager. Commodity ETFs have proven to be volatile, often delivering huge tracking errors, and not at all diversifying. Commodity returns have also been quite disappointing relative to equities and high yield. Perhaps that is the real reason behind the retreat.