Lessons for commodity investors
Document ID: 2009-1488
Published on: 23rd June 2009
Author: Harry Hibbert
Over the decade leading up to 2008 institutional investors exhibited an unprecedented interest in gaining exposure to commodity investment vehicles. The volumes of capital invested in new commodity indices (such as the S&P GSCI) and in specific commodity futures were at record levels by the beginning of the current financial crisis. This shift in the profile of commodity investments can at least partly be explained by widespread beliefs about the diversification benefits and robust excess returns offered by commodity based assets. Recent (and existent) Barrie & Hibbert research examines the rationality of such beliefs; this insights note summarises some key lessons on appropriate assumptions for models of commodity investment risk.
