Targeting hedge funds with commodities event

Stanley Marchon
Originally published in the April 2006 issue

ABN AMRO Global Futures is raising its profile in the commodities sector with an event in May targeting hedge funds and other alternative asset class investors. The event, Focus on commodities: 'Distinguishing between fact and fiction' is the first in a series of educational seminars, (or EDUnar) being promoted by ABN AMRO in conjunction with Stanley Marchon, the event's lead coordinator, and IC LINK Consultants Ltd, its logistical partner.

The EDUnar is designed to promote the bank among target investors and build on the momentum being created in commodity trading. It is being hosted and organized by the 'Commodity Investor Sales Group', which has been recently created by the Global Futures Group and reports to David Phipps, Global Head of Commodities.

"Increased use of commodities as an asset class within the hedge fund portfolios as well as the demand seen in our existing client base made it necessary for us to create this group," Phipps says.

The team, which comprises of Jamie Philip, Saleha Osmani and Oliver Wilkinson, specifically targets CTAs and global macro managers as well as funds of funds, pension funds and family offices.

"One of the primary objectives of the conference is to promote education in commodities. There are certain facts and fictions about investing in commodities as an asset class, and this event aims to explore the thin line between reality and perceived reality within this sector," said Jamie Philip, co-head, commodity investor sales.

Up to 250 delegates are expected at the first EDUnar, being held in London on May 11th 2006. Robert Lindo UK Country Head, Richard Sandor, Chairman of the Chicago Climate Exchange, Sean Corrigan, CIO Diapason, and Robert MacArthur, MD Global Futures, are amongst the keynote speakers. Some free passes are still available for senior pre-qualified investors in the decision making function on a first come first served basis. Contact Saleha Osmani E-mail saleha.osmani@uk.abnamro.com, Tel: +44 207 678 1233

Robert MacArthur MD of Global Futures Europe added: "Commodities have shown remarkable performance over the last couple of years, with the Reuters / Jefferies – CRB index up 18.4% and Goldman Sachs' energy heavy GSCI returning in excess of 25% over 2005 alone.

"Over the last few years, the optimistic growth prospects of large developing countries like Brazil, China and India, and the additional need for oil, industrial metals and construction supplies, have helped to give confidence to many investors that the only way for commodities is up. As a consequence, investment in commodities is growing at an exceptional rate, with even pension funds making substantial allocations to this sector. ABN AMRO EDUnars is hosting 'the great debate' which will attempt to examine these subjects alongside current macroeconomic themes and market trends".

Event Background and objectives

According to Stanley Marchon: "The goal of these 'EDUnars' is to take away the fizzy sales pitches seen in normal forums and stamp out the boredom felt in the more heavy educational summits. Debate will be encouraged with wisdom and knowledge transferred by worldwide experts. Unless explicitly stated, viewpoints will be that of individuals and not their organizations so that our experts can share their experiences without holding back. The media support will be provided by leading hedge fund publications such as The Hedge Fund Journal, Opalesque, MAR Hedge and Hedge Fund Alert. The event will be filmed by David Chidgey, a leading television producer, so that educational DVDs can be produced and distributed to further enhance the scope of the event".

Rising commodity markets are attracting investors to look at investing in this area as an alternative, hoping to find the high growth that equity and debt markets may no longer deliver. Major findings have proved commodities to be negatively correlated with traditional investments, so diversifying some portfolio elements into commodities makes a case of significantly reducing overall risk. One can reason that this is because commodities represent tangible raw materials, carry no credit exposure, and the resources they represent influence a major part of world economies.

An interesting view is that of commodities legend Jim Rogers who said, "…gold can never go to zero, oil can never go to zero, but Enron can and did go to zero."

One school of thought predicts that the froth within commodities is thick while others point to the start of a bull run in this sector powered by demand from the growing powerful Asian economies, the current energy situation, inflationary forces etc. What makes any investment risky within this sector is the same thing that makes them attractive – leverage. These instruments can be traded at low margin using futures, but this also ensures that appetites for reward and risk can be controlled subject to one's tolerance zones and investment time frames.

This evening in particular will attempt to uncover the 'ifs' and 'buts' of commodity investing, with the primary focus on education and enlightenment, with no bias towards any fund, individual or institution. The hedge fund industry has come under tremendous interest as well as scrutiny. It is worth while creating forums like these EDUnars where people can have an open and transparent dialogue on topics of current interests