PT - JOURNAL ARTICLE AU - Gerald R. Jensen AU - Robert R. Johnson AU - Jeffrey M. Mercer TI - Tactical Asset Allocation and Commodity Futures AID - 10.3905/jpm.2002.319859 DP - 2002 Jul 31 TA - The Journal of Portfolio Management PG - 100--111 VI - 28 IP - 4 4099 - https://pm-research.com/content/28/4/100.short 4100 - https://pm-research.com/content/28/4/100.full AB - In this article the authors examine the diversification benefits of adding managed and unmanaged commodity futures to a traditional portfolio that consists of U.S. equities, foreign equities, corporate bonds, and Treasury bills from 1973 through 1999. Consistent with previous evidence, they find that commodity futures substantially enhance portfolio performance for investors, and managed futures provide the greatest benefit. They show that the benefits of adding commodity futures (both managed and unmanaged) accrue almost exclusively when the Federal Reserve is following a restrictive monetary policy. The results suggest that metals and agricultural futures contracts offer the most diversification benefits for investors. Overall, the findings indicate that investors should gauge monetary conditions to determine the optimal allocation of commodity futures within a portfolio, and whether a short or a long position should be established in a particular type of contract.