Uncertainty prevails in the global precious metal market following the unpredictable moves of hedge funds in equity and commodity markets. Hedge funds alternate between equities and commodities depending on the returns they offer. The mood is buoyant in the commodity market, especially after the collapse of US investment bank Lehman Brothers. A rise of the dollar against major global currencies has led to investors flocking to the greenback. Investors are betting big on gold following London-based consultancy Gold Field Minerals Services’ (GFMS) forecast of a supply constraint in the four major gold mining countries of South Africa, Australia, the US and Canada.   more »

When blue-blooded Wall Street banks are going bust, can hedge funds be making hay? May be not. The Credit Suisse/ Tremont Hedge Fund Index, which tracks the performance of hedge funds, has given a negative return this year. According to the August edition of Lipper Hedge Funds Insight report, the index has fallen 2.1 per cent in the year-to-date. In July alone, the hedge funds made a negative return of 2.61 per cent. Over July, the average performance for the 6,700 hedge funds tracked by Lipper was a negative 2.60 per cent — 1 basis point above the Credit Suisse/Tremont Hedge Fund Index.   more »

The Securities & Exchange Board of India (SEBI) plans to allow exchange traded funds (ETFs) based on interest rate futures (IRF) in early 2009, according to TC Nair, whole-time member, SEBI. This instrument would help banks, financial institutions and FIIs hedge themselves against sharp adverse moves in interest rates. Mr Nair was speaking at an Assocham event. “SEBI would shortly permit FIIs to trade in currency futures once the market gets stabilised,” Mr Nair added. He also said applications for registration of 22- 25 foreign institutional investors (FIIs) was pending with the regulator and would be cleared shortly. Interest rate futures are typical futures contracts where the holder agrees to take delivery of a given amount of the related debt security at a later date (usually no more than three years).   more »

Venus Capital Management, Inc. has launched the Venus Index Plus Fund. The general objective of the Fund is to outperform the S&P CNX Nifty India Index without changing the weights in the Index. Venus Capital, after conducting a detailed analysis of India-dedicated hedge funds, found that most India funds, both inside and outside of India, underperformed the S&P CNX Nifty India index on a risk-adjusted basis. They have high Beta with a low Sharpe ratio. This became even more evident this year when the Indian markets dropped approximately 40% and a typical India fund lost 40-55% in the first six months of the year. Venus has segregated Alpha from Beta and has products for investors seeking either. However, Venus feels that “2 and 20” fees should not be paid to obtain Beta and hence, have launched the flat fee Index fund.   more »

Traders and industry experts are disappointed over the extension of the ban on soya oil, chana, rubber and potato futures. They believe this decision will affect operations, as there will be no platform to hedge price risk. Terming the extension ‘unfortunate’, they reiterated that empirical evidence suggests there is no link between inflation in spot prices and futures trading. Instead, rubber shot up from Rs 120 to 141 a kg in the span of four months after the commodity was banned from futures trading. The government prohibited futures trading in the four commodities from May 2008, for four months. Forward Markets Commission (FMC), the commodity regulator, has decided to extend the ban till November 30. Earlier, rice and wheat futures were restricted to check inflation that rose to double digits since June 2008.   more »

Cotton Association of India (CAI), on Sunday said that it plans to launch cotton futures contracts, a top industry official said. "We are working on cotton futures contract. Risk management is a great necessity to stay alive in any business, more particularly for efficient functioning of the cotton sector," Cotton Association of India (CAI) President, P D Patodia, told PTI here. "We are also designing a Cotton Price Index to be launched within a few months along with two new cotton contracts that are being given final touches before the approval of the FMC," he said. CAI proposes to launch two new cotton contracts- Gujarat Sankar-6 and Punjab J34--two varieties of cotton widely traded and exported. They will replace the two defunct cotton contracts on CAI.   more »