A Golf Clap for Reporting on “Commodity Hedge Funds”

We’re not going to lie, when surfing the web, researching what others are writing about the Alternatives world, it typically turns into a post by us because, other articles that either conveniently  leave out essential information or purposefully leave out information because otherwise the article wouldn’t make sense. Managed Futures and alternatives have been getting a bad rap over the past couple of years, and we’ve spent far too much time “setting the record straight.” We thought it might be a good idea to highlight a major publication (The Wall Street Journal) for doing a decent job capturing the climate of “commodity hedge funds” this summer. What are we talking about?

Commodity Hedge Funds are finally getting some “good press” lately, as for the first time in 9 months, they’ve seen positive net flows into funds, according to the Wall Street Journal.

Commodity AUM flows(Disclaimer: Past performance is not necessarily indicative of future results)

It’s certainly not difficult to write a headline about commodities lately, whether we’re talking crops taking a nose dive, the meat markets at all time highs, or coffee showing the biggest move of any of futures market. But the article’s not just talking about asset flows and the “current climate.” It’s talking trends, and unique return drivers, and the ability to make money whether prices are rising or falling.
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“Some investors and managers peg the recent surge in volatility to the reduction in the Federal Reserve’s stimulus program, which is thought to drive investments in so-called hard assets such as commodities. Others contend the disturbances are due to supply-demand fundamentals unique to each market.”

In any case, the price swings allow sharp traders to make money in both directions when they correctly anticipate either rising or falling prices.”

They even understand that it’s not all rainbows and lollipops in commodity trading, noting that you can get caught on the wrong side of the trade when prices reverse:

“In the first months of the year, performance in commodities beat that of stocks as drought in Brazil boosted coffee prices, a virus killed millions of pigs and oil supplies dwindled at the benchmark U.S. delivery hub in Cushing, Okla. Those trends reversed in mid-June, with the GSCI commodity index dropping 10% in the last two months.”

Armajaro Asset Management LLP, the London-based hedge-fund firm that was historically one of the biggest players in the so-called soft-commodities market, which includes coffee and cocoa, also scored in that area, according to an investor update. But wrong-way energy bets cut deeper, and the $1.1 billion firm’s main fund is in the red for the year, people familiar with it said.”

The recent inflows are likely related to the recent positive performance of commodity traders, which have enjoyed the down move in grain markets, and more recently – the selloff in metal prices. While they only quote the Newedge Commodity Trading Index as being up about 3%, that is a month end index which is likely up a bit more after commodity traders we track seeing good performance here in September. (note that the index is different from the Newedge CTA index… in that it’s a sub index covering trading strategies “typically involving physical commodity products.”) Past performance is not necessarily indicative of future results.

For more on commodity specific trading, see the following… and check out our white paper on Ag Traders.

1. Trade Commodities instead of “invest” in them?

2. A Golf Caddy, his mom, and Warren Buffet on Gold

3. Natural Gas ETFs – Heads You Lose, Tails You Lose More:

4. 3 Paths to Commodity Exposure: Which one works best for you?

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Disclaimer
The performance data displayed herein is compiled from various sources, including BarclayHedge, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.

Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history.

Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.

Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.

Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.

RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.

See the full terms of use and risk disclaimer here.

Disclaimer
The performance data displayed herein is compiled from various sources, including BarclayHedge, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.

Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history.

Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.

Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.

Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.

RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.

See the full terms of use and risk disclaimer here.

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