Navigating markets in the age of index funds

摘要

The massive influx of capital into commodity futures from index funds has changed some basic market relationships and created both opportunities and dangers. We will examine the opportunities provided by this capital and show you methods to exploit it as well as help you avoid danger. In the world of commodity trading, long only commodity funds (LOCF), or index funds as they are otherwise known, have come to dominate the futures industry through both their sheer position sizes and the constant swirl of discussion surrounding their future. Nobody can seem to agree on the total capital managed through commodity index funds. Whether you believe their size is approximately $200 billion, as the index managers would have us believe, or $300 billion, as others estimate using CFTC data, one thing is for sure; ignoring this 800-pound gorilla in the room indeed may be very costly. The buy-and-hold style of index funds has changed the basic nature of how commodities trade and these changes can create both risk and opportunity for those who understand the effects of this massive flow of capital.