After an abundance of hedge fund managers flocked to hot commodities last year, now investors are expressing concern, according to The Wall Street Journal. The number of investment pools that trade commodities futures has mounted to more than 100 from 60 or so a year ago, said David Mooney, who runs a fund of commodity hedge funds for United Kingdom-based New Finance Capital. Assets of the 100 funds he tracks have grown to more $24 billion from $14 billion, both from profits and new investor money, he noted. However, in the last year, bad energy bets have led to the closure of three hedge funds. Some anxiety stems from the fact that the commodities boom has been showing its age. Prices are slumping in key markets from oil to copper, despite large increases in some agricultural markets. Top-performing commodity hedge funds have never been more difficult for investors to get into. However, middle-of-the-pack funds may have a harder time attracting and keeping clients’ money this year. Some institutions that divvy up money to hedge funds say they are reconsidering whether to take money off the table. A few are asking managers that invest in multiple sectors to decrease their commodities exposure. Another likelihood is that investors will start to bet on hedge funds that concentrate on other commodities, such as grains and metals, and ease up on those focused on energy. London’s GAM, which invests about $23 billion in hedge funds, is shrinking back on commodities exposure in oil and gas markets, and moving toward funds that trade agricultural products and specialized products, such as one hedge fund that invests in rubber. Nonetheless, picky investors might be getting out of commodities for the wrong reasons. They could miss a run-up in an array of markets, since many analysts argue the current commodities slowdown is just a temporary leveling-off. Also, many other institutions continue to pour money into commodities as a diversification strategy.
The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.