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 Oil price volatility kept managers on their toes in the first
quarter, with Brent crude falling and rising repeatedly before
ending the quarter down almost 4 percent.
"For oil, the market is predominantly bullish and looking for an
excuse to move higher, but the fundamentals are still weak," said
Thomas Timmermann, head of asset management IB at Commerzbank, whose
Rohstoff Strategie Fonds came 10th in the Lipper Global Commodity
rankings, up more than 3 percent.
Commodities as a whole performed poorly again in the first quarter,
with the average actively managed fund in the Lipper Global
Commodity sector down 4.84 percent.
At the top of the rankings, no single strategy or fund style
dominated, with systematic managed futures strategies, long/short,
long-only and hybrid funds all doing well.
"It's a surprise," said Timmermann. "Ours is a long-only
fundamentally-managed fund so it's always difficult to compete in a
volatile market environment like now, with no clear trend."
He attributed the fund's outperformance mainly to an underweight
position in energy and an overweight in precious metals, as gold
performed well in euro terms.
The fund is currently about 70 percent invested, and Timmermann said
the team would use the 30 percent in cash to do some bargain hunting
if prices came under more pressure. "We are waiting to see if oil
prices bottom out in the second quarter, but I think it's still too
early to call the bottom," he said.
Investor sentiment toward commodities improved in the first quarter,
with Barclays Capital reporting total net inflows of $6.6 billion
across the sector, the strongest for commodity investments since
2012. But in March about $1.8 billion of investments were
liquidated.
Barclays Capital suggested the earlier pick up in inflows was
"related to one-off factors, such as bargain hunting in oil, rather
than any sea change in investor views toward commodities as a
long-term asset class".
Retail investors certainly piled into oil in early 2015, trying to
position for an oil price rebound, but with little sign of any
slowdown in production the rally was short-lived. Navigating these
switchbacks presented a challenge for managers.
PUSH-AND-PULL
"The quarter saw a significant push-and-pull between economic
uncertainty and various fundamental supply-and-demand factors, which
led to some meaningful volatility," said Barry Goodman, executive
director of trading at Millburn Ridgefield Corporation, a U.S.-based
quantitative investment manager.
Millburn Commodity, with a systematic strategy, came fifth in the
Lipper table, returning almost 5 percent. Goodman said that while
holding a simple short position in oil through the quarter might
have been profitable, the team reduced or raised its exposure to
take advantage of intra-quarter moves.
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"In the energy sector, we experienced several changes between net
short and net long over the quarter," he said. In terms of
profitability, the energy sector delivered the biggest gains
overall, with heating oil and gas oil the largest positive
contributors. Metals, livestock and softs were also profitable.
Millburn's models are signaling continued downward pressure on
prices in most energy markets, suggesting there are still
opportunities on the short side. "We are very short energies in
general, including close to our maximum short positions in crude,
gas oil and heating oil," Goodman said.
Similarly, Peter Konigbauer, co-manager of the quantitative,
model-driven Pioneer Funds Commodity Alpha, which came seventh in
the Lipper table, said his fund had been strongly underweight energy
for more than half a year.
"That was profitable in January but we were hit in February due to a
recovery in the oil market. Then we got it back in March. At one
time we had almost no exposure to energy, and in absolute terms we
were net short," he said.
The fund is still underweight energy versus its benchmark index, but
it is no longer net short. "The model is saying we should build our
position in gasoline because of the upcoming U.S. summer driving
season," said Konigbauer. "So we have a bit of an overweight in
gasoline against the index."
In terms of overall commodity performance, Konigbauer said he was
more optimistic for the second half of the year: "Then we might see
the oil market come back to $60-$70 a barrel as the reduction in
production should be clearer than it is right now."
He added that the global economy should also be a bit stronger by
then, increasing the demand for commodities.
(Reporting by Claire Milhench; Editing by Andrew Heavens)
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