BarclayHedge Blog

Supply/Demand Imbalances May Only be Part of the Problem; Is the Weak Dollar Also to Blame?

From the Quarter 2, 2008 issue of Barclay Managed Funds Report published by BarclayHedge. The full report also includes 24 hedge fund and managed futures performance ranking tables and in-depth manager profiles. Subscribe. View Roundtables from back issues.

Panel:
Sebastian Barrack, MacquarieInvestment Management, Ltd.
Brad Cole, Cole Partners Asset Management LLC.
Jodie Gunzberg, CFA, The Marco Consulting Group
Hilary Till, Premia Capital Management, LLC



Our panel of experts answers these questions:
Most commodity indices are heavily weighted in energy, primarily oil. No doubt oil has been the headline over the past 12 months as prices have reached historic levels. There have, however, been significant gains by less “flashy” index components (e.g., wheat) over the past several months. In your estimation, have the most successful trading programs been oil-centric, or is there significant potential value added by straying from the typical index weights? In which commodities would you recommend an overweight position over the next 12 months? Which would you underweight or short for the same period?

Gold has also been a major headlining commodity recently despite representing only a minor portion of most commodity indices. The press tends to emphasize gold as a counter to the weakening dollar. To what extent has the weak dollar been a factor in the ascension of gold prices? Are there any other significant fundamental reasons for gold’s lofty valuations? How much have technicals supported the price?

Commodity trading strategies can rudimentarily be divided into discretionary and systematic programs. How does the current and prospective fundamental landscape favor discretionary strategies? In your opinion, which commodities continue to have favorable fundamentals? Which do you see as overvalued? What technical features of the current commodities landscape favor systematic trading programs?

Futures and options have historically been the most prevalent instruments employed to trade commodities. Over the past couple of years, however, there have been a number of commodity-linked structured products and exchange traded funds that allow participation in these markets. To what degree have these new structures been added to the mix of instruments used by professional asset managers? Are there any inherent inefficiencies within these structures that make them attractive? Unattractive?

Another angle for gaining natural resources exposure is by investing in public companies that derive a majority of their revenues from the commodities markets (e.g., oil services, mining, and storage companies). What are the advantages and disadvantage to this type of exposure? Are general equity market correlations a concern, or do these types of stocks offer significant diversification? Are there any attractive public debt, private equity, and/or private debt situations offered by these types of companies?

Historically, within the context of any perceived asset “bubble”, there always tends to be an influx of managers who ride the wave, garnering outsized returns with primarily unhedged strategies. Not surprisingly, most of these managers get carried out on a stretcher when the bubble finally bursts. In your opinion, do you believe commodities are in danger of entering bubble proportions at this time? In you estimation, are there a lot of players riding this wave without much attention to hedging and risk management? How susceptible might the entire commodity sub sector be to a downturn and mass liquidations?

Read the complete article and the panel members' answers.

Labels: Barclay Managed Funds Report, Barclay Roundtable, commodities, inflation

FAIRFIELD, Iowa, May 13, 2008 – Managed futures couldn’t find a direction in April, losing 0.27% according to the Barclay CTA Index compiled by BarclayHedge.

“Several profitable trends of the past few months reversed in April,” says Sol Waksman, founder and president of BarclayHedge.

“Growing confidence that the worst of the credit crisis may be behind us spurred a decline in prices for fixed income instruments as interest rate markets shifted their attention to inflationary concerns.”

Diversified Traders lost 0.74% in April, Systematic Traders were down 0.59%, and Financial and Metals Traders slid 0.56%.

“Although prices for precious metals declined sharply after mid-month, energy prices continued their advance,” says Waksman.

Agricultural Traders gained 1.14%, Discretionary Traders were up 0.20%, and Currency Traders rose 0.08%.

“The US Dollar, which has been in a five-year decline, staged a recovery in April. The rally was fueled by the belief that rate cuts by the Fed may be at an end.”

The Barclay BTOP50 Index, which monitors performance of the largest traders, lost 1.31% in April, but remains up 4.67% through the end of April.

Click here to view 28 years of Barclay CTA Index data.

Sol Waksman is an experienced media source, providing perspectives on hedge fund and managed futures trends. For more commentary or background, call 641-472-3456 or email swaksman@barclayhedge.com.

BarclayHedge (formerly The Barclay Group) was founded in 1985 and actively tracks more than 6,800 hedge funds, funds of hedge funds, and managed futures programs. Barclay has created and regularly updates 18 proprietary hedge fund indexes and eight managed futures indexes. Institutional investors, brokerage firms and private banks worldwide utilize Barclay’s data as performance benchmarks for the hedge fund and managed futures industries.

Labels: BarclayHedge press release, managed futures

FAIRFIELD, Iowa, May 8, 2008 – Hedge funds gained 2.28% in April according to the Barclay Hedge Fund Index compiled by BarclayHedge.

“Overall performance of the hedge fund industry has been on-again off-again in 2008, with losses in January and March offsetting February and April gains,” says Sol Waksman, founder and president of BarclayHedge.

Sixteen of Barclay's 18 hedge fund indexes had a positive return for April.

Technology soared 6.41% to erase a first quarter drop of 5.58%. The Pacific Rim Equities Index jumped 3.75% after three straight months of losses, and Fixed Income Arbitrage gained 3.00% after a 5.71% plunge in March.

The Emerging Markets Index rebounded 3.87% in April following a 4.64% loss in March.

“Global equity markets enjoyed a broad-based rally in April, raising stock prices in both developed and emerging markets,” says Waksman.

“Stock markets in Brazil, China, and India saw double digit increases for the month.”
The Distressed Securities Index gained 1.99% in April after five straight months of losses. “Market pundits are speculating that the financial sector’s worst losses from the sub-prime meltdown may be behind us. As evidence, they cite recent price increases in credit default swaps for financial firms, as well as a narrowing of the interest rate spread between investment grade and high yield credits.”

The BarclayHedge Fund of Funds Index rose 1.16% in April.

The Equity Short Bias Index was down 2.73% in April, however it leads all indices in 2008 with a 10.00% gain year to date.

Click here to view five years of Barclay Hedge Fund Index data, or download 11 years of monthly data.

Sol Waksman is an experienced media source, providing perspectives on hedge fund and managed futures trends. For more commentary or background, call 641-472-3456 or email swaksman@barclayhedge.com.

BarclayHedge (formerly The Barclay Group) was founded in 1985 and actively tracks more than 6,800 hedge funds, funds of hedge funds, and managed futures programs. Barclay has created and regularly updates 18 proprietary hedge fund indexes and eight managed futures indexes. Institutional investors, brokerage firms and private banks worldwide utilize Barclay’s data as performance benchmarks for the hedge fund and managed futures industries.

Labels: BarclayHedge press release, hedge funds

By G. Baquer of ESMT European School of Management and Technology and Marno Verbeek of Rotterdam School of Management, Erasmus University

Explores the flow-performance interrelation of hedge funds by separating the investment and divestment decisions of investors.

Download the full article here

From the May 2008 issue of Barclay's Insider Report. Accredited investors can subscribe to the full newsletter for free.

Labels: Barclay Insider Report, Barclay Insider Report Guest Article, hedge funds