Copper has rallied in early 2009, rising from a low of $2,825 in December to a high of $4,925 in mid-April. UK asset manager Fitzwilliam, launched by BDO Stoy Hayward Investment Management this month, believes the change allows for a bullish outlook on commodities generally.

In a market view statement, the company attributes the copper spike to the Chinese State Reserve Bureau stockpiling the metal. The surge has been further fuelled by speculators remaining significantly “short” copper and a lack of scrap metal in the secondary market, Fitzwilliam said.

"The bounce has been clearly driven by copper in the main – with other base metals following suit - but other commodity prices have remained low. To us, the short term run-up in copper looks excessive but it highlights the explosive nature of commodity prices when demand rises,” the statement said.

Individual commodity prices are highly volatile, Fitzwilliam warns. For the institutional and high net worth investor, a broad-based exposure to commodities can reduce these fluctuations, as part of a long-term commodity investment strategy.

Long term supply constraints have intensified, the company notes. The credit crunch has caused a massive reduction in exploration budgets in both large conglomerates, desperate to refinance their debt, and small companies needing to finance current operations.

Supply has been aggressively cut in some commodities, while production problems remain significant in others – such as Chilean copper and non-OPEC oil output.

Fitzwilliam believes that these supply constraints are very bullish for commodity prices over the medium term. Only a small recovery in end user demand is likely to raise prices – most likely in the latter part of 2009.

The company is an adviser to Fund of Funds in equities, fixed income, hedge funds, commodities and bespoke property vehicles.

BDO Stoy Hayward Investment Management, the wealth management arm of UK accountancy firm BDO Stoy Hayward, has over 200 employees based in offices across the UK.  Internationally, the BDO Stoy Hayward accountancy network has more than 600 offices in 100 countries.