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Investment in commodities to hedge against rising inflation

Mutual fund houses are awaiting regulatory approval to invest in commodity futures in India. They continue to launch commodity-centric equity funds and exchange-traded funds (ETFs) to boost the sector.

01 Aug 2008

While the mutual fund (MF) houses are awaiting regulatory approval to invest in commodity futures in India, they continue to launch commodity-centric equity funds and exchange-traded funds (ETFs) to boost the sector.

Investment in commodities is being seen as the next move to hedge inflation. Equity markets are said to facing challenges from high inflation rates. Commodities is the next in thing as there is a strong correlation with inflation and is also good for portfolio diversification.

The commodity cycles are as long as 10-15 years. Fund managers opine that big pension funds such as California Public Employees Retirement System and the fund houses are diversifying their portfolio to include commodities to hedge against rising inflation.



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