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Managed commodity funds
Author(s) -
Edwards Franklin R.,
Liew Jimmy
Publication year - 1999
Publication title -
journal of futures markets
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.88
H-Index - 55
eISSN - 1096-9934
pISSN - 0270-7314
DOI - 10.1002/(sici)1096-9934(199906)19:4<377::aid-fut1>3.0.co;2-3
Subject(s) - portfolio , economics , commodity , stylized fact , commodity pool , financial economics , closed end fund , sharpe ratio , alternative investment , fund of funds , finance , business , passive management , market liquidity , macroeconomics
Abstract The performance of managed commodity fund investments during the years l982 through 1996 is examined, both as stand‐alone investments and as assets in diversified stock and bond portfolios. Nine stylized commodity fund investments are examined: randomly‐selected, single‐CTAs, pool, and fund portfolios; equally weighted market portfolios (EWMPs) of CTAs, pools, and funds; and value‐weighted portfolios (VWMP) of CTAs, pools, and funds. Further, two subperiods are examined: 1982–1988 and 1989–1996. Based on an analysis using Sharpe ratios as the performance criterion, several types of managed commodity funds make both good stand‐alone investments and good portfolio assets; an EWMP of CTAs and a VWMP of pools receive the highest ranking among the alternative commodity fund investments. It is also shown that commodity indexes are not a substitute for a managed commodity fund investment. A number of issues warrant further study: Can investors still earn consistently attractive risk‐adjusted returns on managed commodity fund investments if they do not hold diversified portfolios of CTAs and pools? Also: How can such high speculative returns be earned in efficient commodity markets? And: Are CTA and pool returns high because commodity fund managers have superior trading skill? An important issue for future research is to determine whether in fact CTAs do possess such skill. © 1999 John Wiley & Sons, Inc. Jrl Fut Mark 19: 377–411, 1999