Skip to content


The blame game

With oil prices fast approaching USD130 a barrel and a global food crisis looming, the US Senate Committee on Homeland Security and Governmental Affairs is scrutinising the role of financial speculators in the commodities markets.

This week senators have been listening to testimony on how speculative investment by hedge fund managers and others may be contributing to food and energy price inflation.

Hedge fund manager Michael Masters, of Atlanta-based Masters Capital Management, argues that commodities prices are being driven up by institutional investors, including pension funds, sovereign wealth funds and university endowments, which are investing in commodity futures based on indices as a hedge against inflation.

Once again, hedge funds have been dragged in as an explanation for why certain prices are behaving abnormally. The fact is that speculators have always existed in the commodities trade, and investment from hedge funds – speculative or otherwise – is nothing new.

Could it not be that other factors are fuelling the boom in commodity prices, such as the weak dollar or increased demand of commodities from fast-growing emerging economies such as China or India? Not according to Masters, who told the senators: 'The increase in demand from index speculators is almost equal to the increase in demand from China' over the past five years.

Whether this is true or not, hedge funds can often be a convenient target even when the facts speak differently. An expert in commodities trading for a large investment bank claimed recently: 'It's not hedge fund money but the pension funds that have been investing in commodities for the past two to three years to diversify their portfolios.'

There is no doubt that the recent rise in commodities prices has been accompanied by a growing interest from institutional investors. But are hedge funds to blame for rising oil prices? So far the evidence looks fairly thin.
Source: Hedge Week

Posted in Main Page.


No Responses (yet)

Stay in touch with the conversation, subscribe to the RSS feed for comments on this post.



Some HTML is OK

or, reply to this post via trackback.



Disclaimer: The www.hedgefundsindia.com website solely provides information about HEDGE FUNDS INDIA space. No data or statement herein is or should be construed to be a recommendation for the purchase, retention, or sale of the securities referred to herein and we accept no liability for the consequences of your reliance on this data and information. The value of investments and the income derived from them may fall as well as rise. The information in this website is based on data gathered from publicly available websites and other information mediums. We have not independently verified such information , do not represent it as accurate, true or complete, make no warranty, express or implied regarding it and shall not be liable for any losses, damages, costs or expenses relating to its adequacy, accuracy, truth, completeness or use. Investments in hedge funds, private equity, venture capital and other private investment funds are speculative and involve a high degree of risk. You could lose all or a substantial amount of your investment. This website does not list, and does not purport to list, the risk factors associated with an investment in any of the funds listed on this site. We do not represent any hedge funds, private equity or investment/financial advisors nor give any investment recommendations.