Hedge Funds Explore Eccentric Metals to Trade

In an overcrowded commodity market, hedge funds are exploring new markets and unusual metals such as cobalt, vanadium and molybdenum, Reuters reports. “There are a lot more people in the metals business, and people are looking for unexplored, unsaturated markets,” said Daniel McConvey of Rossport Investments, a New York-based commodity trading adviser, which invests in the metals. The bulk of money in metal investments has gone to copper, nickel and other key industrial commodities this decade. However, the amount of money poured into these metals has made it harder for fund managers to make a return, so they are looking at other materials, said Keith Dunleavy, a trader a London-based Stratton Metals. Dunleavy has sold cobalt, which is similar to nickel, to hedge funds, and he anticipates prices to rise well past their current 11-year high of $30 per pound. “They started getting into cobalt at $22 and $24. We started badgering them to take profit at $28, but they are not interested,” he said. The metal could grow to $40 per pound, according to Credit Suisse. Cobalt is not traded on an exchange, and, therefore, the market can be opaque and accurate pricing data difficult to find. Another option instead of buying the metal itself is to buy stock in a company that products cobalt, said Marcus Edwards-Jones, managing director at Lloyd Edwards Jones. The rising price of metals is due to the use in products such as flat screen televisions, aircraft parts and car exhaust catalysts. “Lots of these metals are hi-tech, and with the explosion in hi-tech, minor metals are going to feel some sort of that explosions,” said McConvey.  However, one complicated aspect is investors trying to close down their position without freeing a large amount of metal onto the market, which would cause prices to fall. 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.