Hedge Funds Speculative Futures

Hedge Funds Increase Speculative Futures on Commodities

Hedge funds are betting more now on the rising price of commodities than at any time since April 2008.  Russia's drought and other global events may have led hedge funds to increase speculative holdings in futures, which rose 2.6% last week.

An index of speculative holdings in futures for 20 commodities rose 2.6 percent to almost 1.18 million contracts in the week ended Aug. 17, according to data released by the CFTC on Aug. 20. The index, compiled by Bloomberg, is derived by subtracting the short positions, or bets on lower prices, in each commodity from the long position. Net longs climbed in wheat and corn and dropped for gasoline, copper and cocoa.

“It’s not a broad-based improvement in commodities, as we’d seen before,” said Amrita Sen, an analyst at Barclays Capital in London. The net longs in wheat and corn probably rose as investors who had earlier bet on lower prices bought back futures to cover short positions after Russia banned grain exports because of a drought, she said.

Commodity assets under management gained about $8 billion in July to more than $300 billion, driven mostly by new investments, according to Barclays Capital. Wheat has jumped 51 percent since the end of June and corn is up 16 percent on speculation the Russian wheat drought will spur more demand for crops from the U.S.  Source

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