British fund manager Hermes Investment Management is planning to shut down its commodities unit as part of a broader restructuring of the business.
The closure comes as the commodity trading unit faces difficulties in making returns and a shift in investor attitudes.
Hermes said: "We will be closing our commodities capability. We are an active manager, and we have found it increasingly challenging to deliver sustained, active returns in commodities."
As of 30 September 2014, assets under management at the firm’s commodities unit totaled £793m ($1.3bn).
Saker Nusseibeh, chief executive, said the commodities unit remained profitable, but could no longer fit in with the group’s strategy.
"Longer term, we see this trend continuing. This will impact future demand for our strategy and affect our ability to deliver best value to our clients," Hermes said.
Hermes added that more clients saw commodities as a tactical diversification play, best held passively rather than by hiring a manager to outperform the market.
This year, Credit Suisse said it was shutting down its commodities trading, joining the likes of Deutsche Bank, JPMorgan and Barclays, which are either exiting or significantly downsizing their activities.
Additionally, Hermes is planning to launch three new investment strategies in multi-asset, residential real estate and specialist credit.
