Animal Spirits Podcast Summary

Episode: Talk Your Book: How to Invest in Commodities
Date: September 1, 2025
Hosts: Michael Batnick and Ben Carlson
Guests: Don Casturo (CIO, Quantix Commodities), Christoph Gleicher (Harbor Capital)

Overview

In this episode, Michael Batnick and Ben Carlson dive deep into the current state of commodity investing, focusing on the Harbor Commodity All Weather Strategy ETF (HGER). They speak with Don Casturo from Quantix Commodities and Christoph Gleicher from Harbor Capital about the problems with traditional commodity indices, the innovation behind the Quantix index and HGER ETF, and how investors can think more strategically about commodities as part of a diversified portfolio. The discussion addresses long-term returns, portfolio construction, the impact of inflation, geopolitics, and technology on commodity markets.

Key Discussion Points & Insights

1. Is the Dollar Bull Market Ending? [00:45–01:29]

• The hosts note recent weakness in the US dollar and how this environment often benefits commodities, especially gold.
• Gold has been “one of the best performing assets over the last year,” suggesting renewed inflation concerns (C, 00:59).

2. Traditional Commodity Index Problems [02:07–06:48]

• History/Construction of Indices:

  • Most commodity indices (like Bloomberg Commodity Index and S&P GSCI) were originally constructed for hedgers and producers, not investors, thus using production-weighted methodologies.
  • This construction often led to allocations that do not maximally benefit investors with diversification or inflation hedging.

• Quote:

  “...designed for commodities producers rather than commodities investors. If you look at the returns that commodities have put up for investors, they're pretty awful over the long run.”
  — Christoph Gleicher [06:48]

• Traditional indices often overweight oil and neglect assets (like gold) that can serve as stores of value or provide inflation protection for investors.

3. Rethinking Commodities for Investors [08:13–10:18]

• The Quantix team received a key mandate: create an index unconstrained by traditional benchmarks, optimized instead for inflation hedging and portfolio diversification.

• The resulting Quantix Commodity Index, and thus the HGER ETF, launched in early 2022, purpose-built for long-term investor objectives rather than short-term hedging.

• Quote:

  “...being mandated to create an index that's built for an investor, for an investor objective. And that's really what was basically the genesis of where the Quantix Commodity Index came from.”
  — Don Casturo [08:25]

4. What’s Different About the Quantix/HGER Approach? [10:18–15:38]

• Same Commodities, New Weights: Both BCOM and the Quantix Index use essentially the same 24 base commodities, but Quantix changes how they're weighted:

  • Scores commodities by “inflation pass-through sensitivity”: How much of a commodity’s price flows into end-user goods.
  • Factors in “roll yield” (the cost/benefit of rolling futures).
  • Greater allocation to refined products (e.g., heating oil, gasoline) over crude, and more gold.
  • Dynamically reweights between consumables and storable commodities (primarily gold) based on macro signals.

• Dynamic Gold Allocation: The “gold trigger” flexes gold weighting up or down depending on inflationary regime indicators and other macro signals.

• Quote:

  “...the big differentiator with Hedger [HGER] is the gold trigger and how it flexes gold up or down depending on the inflationary environment.”
  — Christoph Gleicher [13:53]

5. How the Proprietary Weighting Works [16:39–20:38]

• Quality Score Method: Each commodity is assigned a quality score, incorporating:

  • Inflation pass-through sensitivity
  • Correlation to CPI over various windows
  • Cost of carry (how expensive it is to hold via futures)

• Dynamic Reweighting Triggers:

  • Gold vs Copper price ratio (growth vs wealth preservation)
  • Shape of the US yield curve
  • Backwardation or contango in commodity futures

• Quote:

  “...when we came up with the rules, we ran it back and it had 8% over BCom outperformance over the previous 20 years. And since it’s been live...it’s outperformed by 8 and a quarter percent...”
  — Don Casturo [16:51]

6. Commodities, the Dollar, and Macroeconomic Factors [20:38–21:43]

• A weak dollar tends to be bullish for commodities, given most are priced in USD, but there is no explicit dollar adjustment in the weighting.
• Industrial metals especially impacted by currency moves.

7. Technology’s Role in Commodities’ Future [21:43–23:52]

• Hosts discuss whether technology (e.g., AI) will be a disinflationary force for commodities.
• Don’s take: While AI could make commodity production more efficient, the explosive need for power and physical resources for AI could be bullish for commodities.
• Christoph adds that current macro themes (deglobalization, decarbonization, etc.) make commodities a prudent inflation hedge, even if technology is broadly deflationary.

8. Strategic Allocations and Investor Trends [24:28–27:44]

• Most financial advisors, wealth managers, and other allocators have very little (if any) commodity exposure.

• The average “strategic” allocation is typically low single digits, with few portfolios exceeding 4-5%.

• There is investor fatigue from prior periods of underperformance, especially the 2010s, leading many to avoid commodities entirely.

• Quote:

  “If I see a portfolio and someone’s got like 4 or maybe 5% in commodities, I’m like, oh, they like this asset class. But often what you’ll see is like a 1 or 2% hold in the asset class, if you see it at all.”
  — Christoph Gleicher [26:47]

9. The Case Against “All Gold” Allocations [27:44–30:50]

• While gold sometimes keeps pace with equities, relying exclusively on gold for inflation protection means missing exposures to other commodities that may spike for idiosyncratic/geopolitical reasons (e.g., energy shocks, agricultural spikes).

• Don and Christoph point to recent years: at times, non-precious commodities soared while gold lagged, and vice versa.

• Quote:

  “There are examples of idiosyncratic risk, geopolitical shocks that can occur...you need to have that exposure at all times to really capture those things.”
  — Don Casturo [28:51]

10. Why Energy Shocks No Longer Cause Commodity Spikes [30:50–32:02]

• The market has become desensitized to geopolitical threats due to repeated warnings that never resulted in significant supply disruptions. But, they caution, at some point, a real supply shock may manifest.

11. The Rise of "Active Indexing" in Commodities [32:06–32:53]

• Christoph notes the blending of active and index investing within the ETF world. The Quantix approach, while index-based, is highly active and designed for outperformance, not simply tracking.

Notable Quotes & Memorable Moments

• “Gold has been one of the best performing assets over the last year. Over the last couple of years it’s doing well and the technician in me says it looks like it’s going higher... Not a prediction. It’s going higher.” — Michael Batnick [00:59]
• “The irony here is these original indices...were to provide production weighted exposure. Think about gold. Not much new gold is produced every year because it’s scarce... So if you’re only going to...invest in stuff as it’s being produced...you’re naturally going to be underweight a really valuable asset like gold.” — Christoph Gleicher [14:50]
• “I think the biggest reason [oil] stopped spiking is because in every geopolitical...scenario, there was never actually a loss of supply. And I think it’s like the boy who cried wolf... But at some point that’s not going to be the case.” — Don Casturo [31:10]

Timestamps for Key Segments

• [00:45] – Dollar weakness and commodity performance
• [02:07] – Historical commodity index construction and its issues
• [08:13] – Creating investor-centric commodity indices
• [10:18] – How Quantix/HGER allocates and rebalances
• [15:52] – How commodities are chosen for the index
• [18:02] – The proprietary weighting methodology explained
• [20:38] – Dollar’s effect on commodities
• [21:43] – Technology, AI, and commodity demand
• [24:28] – Investor trends and current allocation practices
• [27:44] – Gold-only allocations versus diversified commodity exposures
• [30:50] – Oil, geopolitics, and market reactions
• [32:06] – Active management within “index” ETFs

Takeaway

The traditional approach to commodity indices heavily favors producer needs and production weights, resulting in poor long-term investor outcomes. Quantix and Harbor’s HGER ETF reimagines allocation to emphasize inflation sensitivity, roll yield, and macroeconomic triggers, aiming to give investors a better, more consistent portfolio hedge. Strategic commodity allocations remain low industry-wide, but the macro climate may be shifting. The podcast makes a strong case for diversified, dynamic commodity exposure—beyond just holding gold.

For more: Visit HarborCapital.com for details on HGER and further resources.