Journal of Finance and Investment Analysis

Are Commodity Hedge Funds interesting for institutional investors?

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  • Abstract

    This paper aims to analyze whether an attribution of Commodity Hedge Funds could be useful for an institutional investor (insurance company, pension fund). We analyze the out of sample an in-sample asset allocation effects for attributing Commodity Hedge Funds to a simple bond-equity portfolio. The data of these strategies of Funds go back until 2008 which indicates that these strategies are relatively new in comparison to other strategies. However, it is interesting to use the time since 2008, because the environment has changed significantly for institutional investors. Our contribution to the literature is to show the relative attractiveness of this new asset class for institutional investors. We found that Commodity Hedge Fund could improve the Sharpe Ratio of an investors portfolio, but the relative advantage against a Composite Hedge Fund index is limited.

    JEL classification numbers: G11, G15, G23, C58
    Keywords: Hedge fund performance, Hedge Fund Strategies, Commodity Hedge Funds, Asset allocation, Institutional Investors.