Hedge Funds Looking to Metal to Pad Their Portfolios

Metals are doing well these days, reaching some of their highest prices in six years.
After years of little growth, investors are expecting to see further rises in prices as part of a general trend of prices for industrial metals in reaction to production cuts to shrink a supply glut.

Production cuts came a bit too late for some specialist metals hedge funds, which were forced to close due to the oversupply. Among those that closed were Apollo Global Management and Hall Commodities.

The market is also responding to China’s new environmental measures. China is the second-largest economy in the world, and the single largest consumer and producer of industrial metals. As a polluting industry, the manufacture of metals has been curtailed in China, thus contributing to the resolution of the glut crisis.

“We’re seeing renewed interest in metals for a number of reasons … including portfolio diversification and six years of a bear market,” said Gerardo Tarricone, founder at Arion Investment Management.

Hedge funds with significant bets on metals have reaped at least 4% in the 12 months until August 2017. Although some managers are excited by the results, others are proceeding with more caution.

“I have always looked for somebody that could add alpha in the metal space but find it difficult, ” said one hedge fund manager.

Published by James Heinsman

James has worked as a hedge fund manager for years. As someone who has always enjoyed multi-tasking, James brings his vast financial experience and his hedge fund background to his position as writer and editor for Hedge Crunch. Editor James Heinsman can be contacted at james(at)hedgecrunch.com.