Commodities Enter
Investment Mainstream
Pension Funds, Universities
Jump Into the Asset Class;
High Returns, Low Risk
September 9, 2004; Page C1
PARIS -- Hedge funds and other speculators have taken some criticism for the soaring price of oil and other commodities.
But amid the din of the blame game, a broader and more-significant trend in the global investment community has largely been overlooked: Mainstream investors such as pension funds, insurance companies and university endowments -- even Harvard's -- are pumping more money into commodities.
These long-term institutional investors hold, on average, investments in energy, industrial and precious metals, livestock, agriculture and other commodities that are twice those of hedge funds, estimates Jeffrey Currie, head of commodities research at a London office of Wall Street securities firm Goldman Sachs Group Inc.
Often, those investments aren't directly in physical commodities themselves but in commodity-related and energy-related companies and in indexes linked to the price of commodities.
Market analysts conservatively figure that roughly 150 institutions have so-called passive investments pegged to the Goldman Sachs Commodity Index, up from fewer than 50 in 2000. Goldman estimates that more than $25 billion (€21 billion) is tied to the index, compared with $8 billion four years ago. American International Group Inc. estimates that an additional $8 billion to $10 billion in investments is pegged to the Dow Jones-AIG Commodity Index, up from about $200 million a few years ago. (Dow Jones & Co. is also publisher of The Wall Street Journal.)
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