Reasons To But Commodities
By Yaser Anwar, CSC of Equity Investment Ideas
Commodities are expected to attract a growing range of investors over the next five years, but careful selection and more actively managed portfolios will be the key to making money, fund managers say.
Last month, many raw materials notched up their highest prices in several decades, if not their strongest ever, causing many to liken the bull run to the technology stocks bubble.
A panel of fund managers gathered in London for a seminar on asset management developments organized by International Fund Investment said on Monday there were still plenty of reasons why money would continue to flow into the sector.
They cited a weak dollar, lack of investment in supply infrastructure, booming demand from emerging economies and saw commodities as a proven hedge against falling equity markets.
Large institutional investors like pension funds should not be worried about recent big fluctuations in commodities prices, panelists said.
"It doesn't really matter if it (the commodity boom) is a long-term trend or a bubble as we are investing to match our liabilities that sometimes go out 60 years," said Charlie Metcalfe, deputy chief executive of Hermes, Britain's biggest private sector pension fund.
Hermes manages funds for BT and decided earlier this year to invest $1 billion (550 million pounds) into commodities.
"I think that the 600,000 beneficiaries of the BT fund will look back in 20 to 30 years time and think that it was a sensible allocation to make."
Mark Shipman, a professional trader who invests via spread-betting and who has recently written a best-selling book on commodity investment, dismissed talk of a bubble developing in the asset class.
Using the Reuters/Jefferies CRB index as a barometer for commodities, he said this basket of 19 prices was up 75 percent from its 2002 low, versus gains of 77 percent for the FTSE and Nasdaq.
"Commodities haven't exhibited anything near the exponential growth of the Nasdaq," he said, referring to the dotcom bubble.Source: Money News
http://www.equityinvestmentideas.blogspot.com/
Commodities are expected to attract a growing range of investors over the next five years, but careful selection and more actively managed portfolios will be the key to making money, fund managers say.
Last month, many raw materials notched up their highest prices in several decades, if not their strongest ever, causing many to liken the bull run to the technology stocks bubble.
A panel of fund managers gathered in London for a seminar on asset management developments organized by International Fund Investment said on Monday there were still plenty of reasons why money would continue to flow into the sector.
They cited a weak dollar, lack of investment in supply infrastructure, booming demand from emerging economies and saw commodities as a proven hedge against falling equity markets.
Large institutional investors like pension funds should not be worried about recent big fluctuations in commodities prices, panelists said.
"It doesn't really matter if it (the commodity boom) is a long-term trend or a bubble as we are investing to match our liabilities that sometimes go out 60 years," said Charlie Metcalfe, deputy chief executive of Hermes, Britain's biggest private sector pension fund.
Hermes manages funds for BT and decided earlier this year to invest $1 billion (550 million pounds) into commodities.
"I think that the 600,000 beneficiaries of the BT fund will look back in 20 to 30 years time and think that it was a sensible allocation to make."
Mark Shipman, a professional trader who invests via spread-betting and who has recently written a best-selling book on commodity investment, dismissed talk of a bubble developing in the asset class.
Using the Reuters/Jefferies CRB index as a barometer for commodities, he said this basket of 19 prices was up 75 percent from its 2002 low, versus gains of 77 percent for the FTSE and Nasdaq.
"Commodities haven't exhibited anything near the exponential growth of the Nasdaq," he said, referring to the dotcom bubble.Source: Money News
http://www.equityinvestmentideas.blogspot.com/
posted by douglas mcintyre at 5:40 PM
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