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A portfolio holding dozens of companies across a wide range of sectors can appear well diversified. Yet, an external shock can expose shared vulnerabilities, sending many of those holdings lower in unison. That’s one reason why resources and commodities have become appealing for many advisors seeking sources of uncorrelated returns for their clients.

Shares in a resources company can be attractive, offering accessible, liquid exposure, but returns reflect business decisions as well as commodity prices. A producer that has hedged future sales may benefit less from rising commodity prices, while receiving some protection when those prices decline.

Advisors should look closely at the underlying investment and the quality of the company’s assets and its history, says Robert Rothenberg, senior wealth advisor and senior portfolio manager with Rothenberg Wealth Management at Harbourfront Wealth Management Inc. in Montreal.

“Management track record is huge,” he says.

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Read the article on the Globe and Mail website: How real assets can add uncorrelated returns – The Globe and Mail