Good benchmark for commodity funds?

heech · May 12, 2010

Hi there,

Just curious what's most commonly used as a performance benchmark for commodity fund managers. Just looking around, I've come across:

- S&P GSCI,
- Morningstar (Long/Short, Long-Only, etc, etc...)

Any reason why one would be preferred over another? GSCI seems popular, but I'm a little skeptical since it appears to be a long only index. The S&P 500 of course is long-only also... so perhaps it's not so invalid.

trackstar · May 12, 2010

Credit Suisse managed futs index would be the #1 on my list.

heech · May 12, 2010

Thanks, hadn't seen that before. Looks more legit than other managed futures indexes I've seen... partly by limiting to $50mm AUM.

How about BarclayHedge's CTA Index?

nazzdack · May 13, 2010

Quote from heech:
GSCI seems popular.....

The GSCI and CRB are very energy-sensitive. Have a "hurdle goal" of doing 20% to 25% per year. That will tend to keep you ahead of the pack.

bolter · May 13, 2010

heech,

What do you mean by "Commodity fund manager"? Is he really commodities only? Is the fund actively managed or passive?

Ask the manager what benchmark he recommends/uses, or have a look at his marketing materials.

Most of the prominent commodity indexes (CRB, GSCI etc) are:
a) trade weighted, thus 65%+ energies.
b) investable.
c) passive.

Dow Jones have some good non-traded weighted passive commodity indexes.

A generic CTA or Managed Futures index will not be a good benchmark for a commodities only fund, because most of these assets will be invested in financials (there is not much liquidity in commodities). And obviously they are actively managed and generate "absolute returns" (obstensibly).

There are a large number of commodity and hedge fund index providers these days so should not be hard to find what your looking for. You then need to crunch the numbers to understand what you have.

Good luck.

bolter

MGJ · May 13, 2010

This is the one that I happen to like: http://www.barclayhedge.com/research/indices/cta/sub/sys.html

If you pay the $5000 per year subscription fee, you can access many, many other indexes, from (of all companies) Morningstar.

ASusilovic · May 13, 2010

Quote from heech:

Thanks, hadn't seen that before. Looks more legit than other managed futures indexes I've seen... partly by limiting to $50mm AUM.

How about BarclayHedge's CTA Index?

Oh and there is also this index by this very large FCM I do no want to name :

http://www.newedge.com/web/guest/brokerage_services/research/absolute_return_indices

ASusilovic · May 13, 2010

Ever heard of the HFN CTA/Managed Futures Index ? Here you go :

http://www.hedgefund.net/hfn_public/marketing_index_new.aspx?template=realtime.html

Rodney King · May 13, 2010

The various indexes mentioned are good, but another, possibly better, approach is to look at actual investible products, since by definition they don't suffer from biases such as survivorship. There are some open-end mutual funds, and ETFs, either already available or coming out soon that do/will invest in either long-only commodity programs, or CTA-style trendfollowing programs.

heech · May 13, 2010

Quote from bolter:

heech,

What do you mean by "Commodity fund manager"? Is he really commodities only? Is the fund actively managed or passive?

Ask the manager what benchmark he recommends/uses, or have a look at his marketing materials.

Hi there,

As it happens, *I* am the manager in question... and that's why I'm trying to figure out what benchmark to recommend or use.

I would say my portfolio weights are closer to GSCI/CRB than any of the other indexes. I'm about 45% energy, 35% soft commodities, 20% ags. No financials/equities at all.

However, it's an active managed strategy (black-box active trading application actually) intended to generate "absolute returns"... which is why the CTA index may be a better match than the GSCI measure.