Although commodity prices have swung widely recently, institutional investors continue to value them as a key diversifier, Reuters reports.So far this year, commodity indexes have underperformed major equity benchmarks. The best performer this year, for instance, is the Dow Jones-AIG Commodity Index, up 5.9% year to date, compared with the Dow Jones Industrial Average’s 9.3% climb. Nonetheless, large institutional investors continue to allocate between 2.5% and 5% of their portfolio to commodities, knowing that they swing in the opposite direction of equities and fixed income.

“The correlation between commodities and equities has turned more negative than a year ago, so as a result, the diversification argument has actually increased,” said Francisco Blanch, head of global commodity research at Merrill Lynch.

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