Wachovia Securities has issued its first commodity-linked note in response to growing demand for inflation-hedging products. The note, which is designed for high-net-worth clients in Latin America, is linked to a basket of commodities including oil, industrials and precious metals. Over the last year, retail demand for commodity based products has surged because investors want to hedge against inflation and also diversify their portfolios, explained Eric Glicksman, a managing director and head of equity and fund structured products at Wachovia in New York.
Wachovia's move is part of a trend toward commodities. For example, last month SG Corporate & Investment Banking announced it will offer swaps, options and structured notes linked to the Jefferies Commodity Performance Index, Goldman Sachs Commodity Index and the Dow Jones-AIG Commodity Index.
Commodities indices tend to be negatively correlated to stocks and bonds and have a positive correlation with inflation, especially when it's unexpected, said Kurt Nelson, a v.p. with AIG Financial Products in Wilton, Conn.
