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Alternative Market Briefing

Comment: Rickety Rationale for Commodity Investing

Friday, February 17, 2017

Matthias Knab, Opalesque:

RCM Alternatives writes on Harvest Exchange:

More than a few are likely to be confused and/or upset when and if commodity prices go on a tear higher and their absolute return program doesn't keep pace.

It seems those articles calling for the death of commodity funds didn't resonate with investors looking to get in on a possible uptrend in the commodity markets. Thirty-Three Billion in new money flowed into Commodity Exchange Products in 2016, the most since 2009, and it doesn't look like investors are slowing down in 2017. According to RBC Capital Markets, investors poured $3.3 Billion into global commodity funds in January, bringing total AUM to $172.3 Billion. It turns out investors did listen to op-ed's like this one, calling on investors to "bulk up on commodities," mainly on the idea that that we might see a resurgence in the commodity super-cycle in 2017.

A few things catching our eye here:

1. This is performance chasing writ large...The main interest for these flows is that the commodity indices were up last year. It's usually shrouded in excuses like inflation hedges, but the interest would have been much more muted, if existent at all, had commodity markets posted another losing year in 2016. Will "commodities" push higher in 2017? Who knows, but it......................

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