Managed commodity funds

✍ Scribed by Edwards, Franklin R.; Liew, Jimmy

• Publisher: John Wiley and Sons
• Year: 1999
• Tongue: English
• Weight: 234 KB
• Volume: 19
• Category: Article
• ISSN: 0270-7314
• DOI: 10.1002/(sici)1096-9934(199906)19:4<377::aid-fut1>3.0.co;2-3

✦ Synopsis

The performance of managed commodity fund investments during the years l982 through 1996 is examined, both as stand-alone investments and as assets in diversified stock and bond portfolios. Nine stylized commodity fund investments are examined: randomly-selected, single-CTAs, pool, and fund portfolios; equally weighted market portfolios (EWMPs) of CTAs, pools, and funds; and valueweighted portfolios (VWMP) of CTAs, pools, and funds. Further, two subperiods are examined : 1982-1988 and 1989-1996. Based on an analysis using Sharpe ratios as the performance criterion, several types of managed commodity funds make both good stand-alone investments and good portfolio assets; an EWMP of CTAs and a VWMP of pools receive the highest ranking among the alternative commodity fund investments. It is also shown that commodity indexes are not a substitute for a managed commodity fund investment.

A number of issues warrant further study: Can investors still earn consistently attractive risk-adjusted returns on managed commodity fund investments if they do not hold diversified portfolios of CTAs and pools? Also: How can such high speculative returns be earned in efficient commodity markets? And: Are CTA and pool returns high because commodity fund managers have superior trading Note: The authors wish to thank Richard Oberuc of Burlington Hall Asset Management for his assistance with the data and helpful comments on a number of topics, and MAR for providing the data.