In the past few years, the correlation between commodities and other asset classes has increased, calling into question the diversification benefits of commodity indexes.

An academic study suggest that the increased correlation is caused by the slew of ETFs and funds that now track commodities. With  access these products, passive investors buy and sell commodities as a homogenous block, as opposed to individual future contracts. As a result, fundamental supply and demand characteristics of individual commodities no longer matters. Consistent with this theory, the correlation of non-indexed commodities has remained close to its long term average.

Read more in this research summary.