Commodity investment is back in the spotlight. After a decade of poor performance, many commentators delivered a more bullish outlook for commodities during the first quarter. Such predictions are buoyed by global economic growth and some helpful market dynamics, such as the reduction in contango. Goldman Sachs, for instance, announced on February 1st that it expects returns of 15% on its commodity index (GSCI) over the next six months and claimed that the environment for commodities was “the best [seen] since 2004-2008.” Prices have surged, fallen amid the equities rout and risen again. Several large investors have signalled their intention to enter this often-controversial space, drawn not only by the investment outlook but by the sector’s inflation hedging characteristics. The recently announced 5% allocation by the influential UK National Employment Savings Trust (whose Deputy CIO is quoted above), for example, was hailed with praise in some quarters and derision in others. A popular national newspaper claimed that the “wild west of commodities is no place for NEST’s members” and criticised the “fetish” for “so-called uncorrelated returns.”
The Hedge Fund Journal’s premium content is only available to subscribers and those on our complimentary 7-day trial. Join today for the latest in-depth profiles and commentary covering the full spectrum of the hedge fund industry.