Chidem Kurdas
Most of the money going into commodities goes to index investments. These suffer from a perennial problem regardless of what’s happening in markets for commodities, known as the negative roll yield. Investors can lose money even when the basket of commodities the index represents gain value. Commodity hedge fund people will tell you that to escape this horror you should give the money to them – for a higher fee, of course – instead of putting it on an index. (more…)
Chidem Kurdas
Third-generation commodity index funds, using a rules-based approach to set the mix and weightings of individual commodities, are new. Third-generation indexes may outperform the first generation, exemplified by S&P GSCI, by as much as 10% a year or better.
But the investment record is short. The first such ETF, the US Commodity Index Fund, was launched in August 2010—see interview with United States Commodity Funds chief investment officer John Hyland in Opalesque Futures Intelligence, a publication I edit. (more…)
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