Yup, these commodity funds haven't worked out as people hoped for a variety of reasons. My favorite is the persistent contago in the market that forces these funds to buy the forward month at a high price and settle it closer to the lower prompt month price. All the historic studies showing how beneficial commodity forwards were to portfolios looked at periods dominated by backwardation. Many academics assumed that backwardation was a structural feature of the market and that it was free money to be harvested by investors as "insurance premiums." It's funny how things stop working the way they used to once investment products or strategies become mainstream. Now instead of receiving the premium, investors are paying them. Ha.
__________________
Retired early, traveling perpetually.
|