Pension funds and other investors shouldn't avoid commodities while they are in "contango," when commodity futures prices are higher than current spot prices, said Matthew Schwab, manager of the investor group at AIG Financial Products, New York.
"If the concern about investing is because (that in) the current (contango environment) people are predestined to lose money, that is not the case," Mr. Schwab said. "Over long periods of time, commodities are in contango. There is no data that (suggest) contango is a source of negative return."
In fact, he said, "returns during periods of contango are higher" than times when spot prices are higher than future prices.
The Dow Jones AIG Commodity index — which AIG-FP helps produce — recorded a total return of 5.7% for the year ended March 31, a period when commodities were mostly in contango, Mr. Schwab said.