Volatility Commodity Hedge Funds
Low Volatility Lowers Returns for Commodity Hedge Funds
The low volatility in the market lately may settle concerns for observers and the average investors but commodity hedge funds are not so happy. Hedge funds trading in commodities are able to make some of the best gains off volatile metal, energy or other commodity prices.
Mr Hall was not alone. The year 2010 is shaping up to be a hard slog for specialist commodity hedge funds, whose managers are paid handsomely to reap big gains trading volatile energy, metals and farm crops. Many markets have ambled sideways, leaving few opportunities for profit.
The HFRX Commodity Index, an industry yardstick, was down 3.5 per cent this year, according to Chicago-based Hedge Fund Research. While fresh investment has varied from fund to fund, it “hasn’t been extremely active,” says Ernest Scalamandre, whose New York-based AC Investment Management puts money in commodity hedge funds. “Two or three years ago, the pace was much more robust.”
Key selling points for these funds are that growth in emerging markets will boost demand and prices for energy, industrial metals and food. Commodities have historically moved out of step with equities, a draw for institutions seeking diversified portfolios. Source
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