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:
http://aaronandmoses.blogspot.com/2008/05/pimco-pimps-commodities.html
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.
http://online.wsj.com/article/SB121210611821931167.html?mod=hpp_us_whats_news&apl=y&r=390447
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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