Skip to main content

Commodity indexes surpass funds

Commodity index investment products are helping mainstream investors ride the bull market in commodities. And as Bloomberg reports, this year the indexes have outperformed the leading commodity focused hedge funds.

Excerpt from, "Calpers beats Pickens as Commodity Indexes Clobber Hedge Funds".

T. Boone Pickens, the billionaire oil trader who predicted crude's rise to $100 a barrel, is lagging behind commodity-index investors for the first time since 2003.

Even California Public Employees' Retirement System, the 75-year-old pension fund that ignored commodities until eight months ago, is beating Pickens. Calpers invested in the Standard & Poor's GSCI Index, up 32 percent this year, while Pickens's BP Capital fund rose 22 percent.

From Dwight Anderson's Ospraie Management LLC to Global Advisors LP, commodities hedge funds failed to anticipate the 58 percent advance in oil and 31 percent gain in gold that powered indexes to their highest levels in two decades. While bullish forecasters at Goldman Sachs Group Inc. and Deutsche Bank AG advised clients to double down on commodities in January, they didn't expect this year's returns.


I have to say, this level of return from the overall commodity indexes was not what I was expecting for this year.

After a four or five year run in the GSCI, I expected a rather muted performance or even the start of an intermediate term correction in the major indices, with the potential for larger gains concentrated in several of the more overlooked individual commodities and commodity sectors.

It turns out Goldman Sachs was right in their 2007 call to "double down on commodities". I was wrong. Congrats to everyone who played it right, including the major pension funds like Calpers, who were highlighted in Bloomberg's recent article.

Whether or not the index players will be able to outperform the leading commodity hedge funds over the longer term is another issue, and it is one that is taken up in Bloomberg's piece.

Still, you have to give it to Jim Rogers and those who predicted the rise of commodity index investing and investors' growing acceptance of these products. They were absolutely right, and the market for these investment products is still growing.

Just last Friday, the Financial Times reported that JP Morgan and BNP Paribas were developing commodity index vehicles that will allow investors to make longer-term bets on commodity prices movements.

It was also noted that S&P had forecast a 20 percent increase in commodities index investment for 2008. Commodity investing has gone mainstream.

Popular posts from this blog

Seth Klarman: Margin of Safety (pdf)

Welcome, readers! Signup for free email updates at the Finance Trends Newsletter . Update: PDF links removed due to DMCA notice. Please see our extensive Klarman book notes below. New visitors, please check the Finance Trends home page for all new posts. Here's something for anyone who has been trying to get a look at Seth Klarman's now famous, and out of print, 1991 investment book, Margin of Safety .  My knowledge of value investing is pretty much limited to what I've read in Ben Graham's The Intelligent Investor (the book which originally popularized the investment concept of a "Margin of Safety"), so check out the wisdom from Seth Klarman and other investing greats in our related posts below. You can also go straight to Ronald Redfield's Margin of Safety book notes .    Related posts: 1. Seth Klarman interviews and Margin of Safety notes     2. Seth Klarman: Lessons from 2008 3. Investing Lessons from Sir John Templeton 4.

Slate profiles Victor Niederhoffer

Slate's recent profile of writer/speculator, Vic Niederhoffer has been getting some attention from traders and finance types in recent days. I thought we'd take a look at it here too, to offer up some possible educational value from Vic's experiences with trading and loss. Here's an excerpt from Slate's profile of Victor Niederhoffer : " I've enjoyed getting your e-mails. It sounds like you've thought a lot about being wrong. Well, the reason you contacted me, to call a spade a spade, is that I'm sort of infamous for having made a big, notorious, terrible error not once but twice in my market career. Let's talk about those errors. The first was your investment in the Thai baht, which pretty much wiped you out when the Thai stock market crashed in 1997. I made so many errors there it's pathetic. I made one of my favorite errors: "The mouse with one hole is quickly cornered." That is key. There are certain decisions you make in li

William O'Neil Interview: How to Buy Winning Stocks

Investor's B usiness Daily founder and veteran stock trader, William O'Neil share d his trading methods and insights on buying winning stocks in an in-depth IBD radio interview. Here are some highlights from William O'Neil's interview with IBD: William O'Neil's interest in the stock market began when he started working as a young adult.  "I say many times that I didn't get that much out of college. I didn't have much interest in the stock market until I graduated from college. When I got married, I had to look out into the future and get more serious. The investment world had some appeal and that's when I started studying it. I became a stock broker after I got out of the Air Force."    He moved to Los Angeles and started work in a stock broker's office with twenty other guys. When their phone leads from ads didn't pan out, O'Neil would take the leads and drive down to visit the prospective customers in person.