Friday, May 30, 2008

Pension Funds Commodity Investments

A giant money-management firm, Allianz SE's Pacific Investment Management Co., or Pimco, which manages about $15 billion in commodity index funds, in recent days has circulated a position paper arguing that institutions and other index investors aren't a meaningful contributor to soaring commodity prices...

Of course they would argue that. The fund went from $200 million to $15 billion in assets. If you want the story on PIMCO and commodities, you can get it here:

Yet as global demand for commodities intensified, spurred by rapid growth in China and India, more pension funds began to view commodities not just as a way to diversify but as a source of returns. Since the end of 2005, index-linked commodity investment has doubled to $260 billion, according to Citigroup. During the first quarter, about $40 billion was added to the market. The California Public Employees' Retirement System, or Calpers, recently doubled its commodity positions to $1.1 billion...

A Goldman Sachs energy analyst argued this month that investors whom critics label "speculators" are indeed helping to push up commodity prices -- but that isn't necessarily a bad thing. "The so-called commodity speculator should be applauded for speeding up the message to both oil companies and consumers that energy markets are tight," the analyst's report says.

So everyone should now pay more for commodities so Goldman can sell PIMCO their commodity swaps? That's like dating a stripper when your marriage is rocky!

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