How Do You Take Your Commodity Exposure?
Commodities are an interesting asset class. A classic case of “Wall Street Trend following:” Sell products that have recently done extremely well.
Prior to the massive commodity runup commodities were a speculator’s game–Why invest in commodities? Are commodities even an asset class?
Then in the early 2000’s commodities went on a raging bull market. All the sudden every endowment/pension on the planet needed exposure to the “ultimate uncorrelated alpha.”
That worked out well in 2008…D’oh! But the concept survived and commodities are still an integral allocation piece for most allocations.
Below I present some results for 3 key competitors in the space:
- SPGSCI–Goldman Sachs Commodity Index. (original product)
- DBC–DB PowerShares Commodity Index. (GSCI but with better “roll” control)
- SDCITR–Summer Haven Dynamic Commodity Index. (the “academic” attempt)
Here’s the performance YTD. Looks like the vampire squid and the ivory tower are neck and neck.
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Definitions of common statistics used in our analysis are available here (towards the bottom)