Risk-Return Analysis of Commodities Investments

You are an investment analyst preparing a detailed report for a hedge fund that is considering increasing its allocation to commodities within its portfolio. The fund's portfolio manager is particularly concerned about the risk-return profile of commodities as an asset class.

Discuss the unique risk factors associated with commodity investments, including but not limited to, market risk, liquidity risk, and geopolitical risk. Provide a thorough analysis of how these risks can affect expected returns, particularly in volatile market conditions. Additionally, you are required to compare the risk-return characteristics of commodities to those of traditional assets such as equities and bonds. Highlight the implications of including commodities in a diversified investment portfolio and suggest how a portfolio manager might mitigate the risks identified.