The Handbook of Commodity Investing

By trivializing and demonizing investment in commodities, the news media is to some degree responsible for deterring fund managers from making appropriate and profitable asset allocation decisions. For example, at the bottom of the last commodity cycle, the Financial Times reduced its commodities coverage to an eighth of one page—tantamount to a news blackout. Small wonder then that many institutions forgot how to trade commodities altogether and had zero asset allocations to commodities. Armed with this handbook—which brings together views from experts in many different fields engaged with the commodities markets—market professionals can gain new illumination as well as confidence in this complex investment process. The chapters in this book allow readers to take a ‘‘knowledge shortcut,’’ and, perhaps, avoid some of the pitfalls that lie in wait for the unwary. Of course, there are many ways of approaching commodity investment. A good starting point is to formulate a top-down view and then calibrate the time horizons over which the chosen strategy plays out. For instance, in the ‘‘softs’’ and ‘‘agricultural’’ markets, traders often focus on short-term, ‘‘high-frequency,’’ seasonal cycles that relate, say, to weather patterns in crop-producing areas. So a long-term view in agricultural commodities would be 12 to 24 months—equating to one or two planting and harvesting