Leigh Goehring and Adam Rozencwajg, who previously helped manage about $5 billion in assets at Chilton Investment Co., told Bloomberg on Wednesday that they were seeking to raise $1 billion for a new commodities mutual fund, betting that prices have bottomed out after years of declines.
Flows into commodity index funds, popular among large managers in the last bull run, have shown signs of recovery since markets turned positive last year.
Total investments in the Bloomberg and S&P GSCI indexes have risen to a rough estimate of $115 billion from a low of about $60 billion around the start of 2016, though still well below a peak of as much as $300 billion in 2011, said Mark Keenan, head of Asia commodities research at Societe Generale. By comparison, the Bloomberg index is up about 12% since the beginning of last year. Long-term funds make up about three-quarters of such investments, Mr. Keenan said.
While there are few definitive figures for such flows, Barclays' estimates show a similar trend of investment in swaps linked to commodity indexes bottoming out in 2015 at $62 billion after a peak of $224 million in 2012. The bank's most recent calculation, combining Commodity Futures Trading Commission data with feedback from investors, gave a total of $94 billion as of September 2016.
The moves may be larger in the current quarter as portfolios increase the share of assets held in commodities, Mr. Keenan said in Singapore. Some “people who have maintained a core 1% holding are looking to increase their exposure,” he said.
It's the not the first time long-term wealth managers substantially raised their holdings of natural resources that, while volatile, offer a way to tap into an improving economy or hedge against inflation. In 2011, pension funds had about 3% to 5% of assets invested, but as prices ground lower through 2015 they scaled back or sold out entirely, Mr. Keenan said.
The memory of such losses may be enough to discourage some.
“There are no signs that I've seen that a new bull market is here or is close for commodities,” said John LaForge, the Sarasota, Fla.-based head of real assets strategy at Wells Fargo Investment Institute, which oversees $1.7 trillion. “We're probably at least five years away.”
Buying and selling of exchange-traded funds that allow investors to bet on individual or groups of commodities paint a conflicted view of demand. This month, data compiled by Bloomberg Intelligence showed $450 million was taken out of long-only ETFs connected to broad baskets of natural resources.
However, that figure is offset by the launch of the Source Bloomberg Commodity UCITS ETF with about $500 million of seed capital, excluded from the flow data because it's a new fund.