Commodity MFs beat hedge funds in '09

Investors favoured mutual funds over hedge funds for commodity investments in the first quarter of 2009, seeking the protection of regulated money managers, data from EPFR Global and Gardner Finance AG show.

Mutual funds investing in commodities attracted a net $3.2 billion through March 25, swelling combined assets by 10 per cent from the end of last year, Cambridge, Massachusetts-based researcher EPFR said. Commodity hedge funds’ assets were flat, said Michael Laznicka, chief executive officer of Gardner.

“Investors don’t want unregulated products anymore, period,” said Laznicka, whose Zug, Switzerland-based company tracks about 600 commodity and energy hedge funds.

Hedge funds dropped 19 per cent last year, according to Chicago-based Hedge Fund Research, the biggest decline since the firm began tracking data in 1990. About 45 commodity hedge funds, or 8 per cent of the total, said in the first quarter they would close. That compares with a rate of about 15 per cent for the whole of 2008, Gardner estimates.

“Many don’t make money, they don’t lose money, but there’s very little assets left in these funds,” Laznicka said. “If this is not improving, they might just disappear.”

Hedge funds are private, largely unregulated pools of capital whose managers can buy or sell any assets, bet on falling as well as rising asset prices and participate substantially in profits from money invested.

Commodity mutual funds now manage about $34.4 billion, according to Ian Wilson, a managing director at EPFR. Last quarter’s growth in new money was the fastest since 2006, he said. Assets peaked at $68.8 billion in May 2008.

Governments and central banks are spending trillions of dollars in an effort to stimulate economies and combat the worldwide economic slump.

“There’s a concern that there will be an inflationary pressure as governments are printing money,” Wilson said by phone. “Gold, in particular, is attracting investors’ interest because of its safe-haven status.”

Assets in the SPDR Gold Trust, the biggest exchange-traded fund backed by gold, are at a record 1,127.44 tonnes, more than the amount of bullion held by Switzerland’s central bank.

Investors withdrew a net $5.7 billion from global bond funds in the first quarter.