05.27.2014
By Terry Flanagan

Investors Increase Interest in Commodities

Institutional investors are showing renewed interest in commodities as the Newedge Commodity Trading Index has the best performance so far this year amongst the derivative broker’s range of indices.

Commodity funds, as represented by the Newedge Commodity Trading Index finished up 1.17% in April.

Newedge said in a statement: “Year-to-date, the CTI (and sub-indices) leads the Newedge Index performance with a return of 3.25%.”

The Newedge Commodity Trading Index includes funds that use a variety of strategies to profit from price moves in commodity markets including trading physical commodity products or derivatives in either directional or relative value strategies or long short equity strategies focused on commodity related stocks.

James Skeggs, global head of advisory group-alternative investment solutions prime clearing services at Newedge told Markets Media that the commodity index was performing well due to price increases in the underlying commodities markets.

“We have seen a pick up in institutional investors looking at commodities again after a period when we received very few calls,” Skeggs added. “This could be an indication that flows into the asset class are about to increase.”

Skeggs said investors are seeing trading opportunities in commodities as the asset class underperformed between 2011 and 2013. “Investors are interested in commodities across the board including agriculture, oil and energy,” he added.

Other opportunities are also due to banks withdrawing from the commodities market. Last month Barclays said it would exit from most of its global commodities trading business following in the footsteps of rivals such as JPMorgan Chase and Morgan Stanley.

Newedge also has an index of commodity trading advisors which calculates the daily rate of return for a pool of the largest 20 CTAs that provide daily returns and are open to new investment.

Some of the top performing hedge funds in the Newedge CTA index in April included Graham Capital (K4D-15V) with a return of 2.31%, Aquila Capital (AC Risk Parity 12) which gained 2.19% and Aspect Capital (Diversified) which rose 1.65%.

Featured image via Dollar Photo Club

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