Commodities Classification in Alternative Investments

Understanding the intricacies of alternative investments is pivotal for CFA candidates. Among these, commodities represent a unique asset class that can diversify an investment portfolio. Commodities can be broadly categorized into two types: hard and soft commodities. Hard commodities are typically natural resources that are mined or extracted, while soft commodities are agricultural products or livestock.

Consider the following scenario: A portfolio manager is evaluating the potential inclusion of different types of commodities into her investment strategy. She aims to achieve diversification and hedge against inflation. Below are three statements made by the manager regarding hard and soft commodities.