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Alternative Market Briefing

Investors eye commodities funds

Monday, August 01, 2016

Bailey McCann, Opalesque New York:

Commodities funds ended June in positive territory up +2.72 percent, according to performance data from eVestment - a rebound for the funds which has persisted throughout 2016. Asset flows have been consistent over the past 9 months as well, suggesting that investors are once again interested in commodities funds even after the wild price swings in commodity prices over the past few years. For investors looking to cash in, being defensively positioned will be key, says Jason Lejonvarn, Managing Director, Mellon Capital Management.

"The main issue with the commodities benchmark is that it forces you to be long all commodities. But some commodities have big drawdowns so we want the opportunity to be able to go long and short," Lejonvarn tells Opalesque in an interview. Mellon Capital offers a long/short commodities strategy that he says the firm is offering as a way of helping investors avoid some of the historical pitfalls common to commodity funds.

According to Lejonvarn, gaming the roll and other strategies common to commodities funds have lost their edge over the years as more players have come into the market. Today, commodities funds have better information and can be more dynamic than strategies based on a long-only benchmark. "Commodity benchmarks are like the old wooden tennis rackets. They were good but they are no match for today's technology," he contends.

Mellon's Commodity Alpha Fund opts to take long and ......................

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