LONDON, June 28 (Reuters): Commodities are expected to attract a growing range of investors over the next five years, but careful selection and more actively managed portfolios will be the key to making money, fund managers said . Last month, many raw materials notched up their highest prices in several decades, if not their strongest ever, causing many to liken the bull run to the technology stocks bubble.
A panel of fund managers gathered in London for a seminar on asset management developments organised by the International Fund Investment said there were still plenty of reasons why money will continue to flow into the sector.
They cited a weak US dollar, lack of investment in supply infrastructure, booming demand from emerging economies and saw commodities as a proven hedge against falling equity markets.
Large institutional investors like pension funds should not be worried about recent big fluctuations in commodities prices, panelists said.
Hermes manages funds for British telecom group BT and decided earlier this year to invest US$1 billion (US$1 = RM3.68 billion) into commodities.
Mark Shipman, a trader who invests via spread betting and who has recently written a best-selling book on commodity investment, dismissed talk of a bubble developing in the asset class.
Using the Reuters/Jeffries CRB index as a barometer for commodities, he said this basket of 19 prices was up 75 per cent from its 2002 low, versus gains of 77 per cent for the FTSE and Nasdaq.
"Commodities haven't exhibited anything near the exponential growth of the Nasdaq," he said, referring to the dotcom bubble.
Omar Kodmani, senior executive officer of Permal, one of the world's largest funds using hedge funds as an investment vehicle, with US$25 billion under management, said the commodity bull run could have another 10 years to run.
But he said the rally was now entering a phase which required a much more actively managed and selective approach to investment, rather than just buying "commodities" and waiting for the returns to flow in.