NEW YORK (Reuters) - Investment strategists at Calstrs are recommending the No. 2 U.S. pension fund invest up to $2.5 billion in commodities in the next three years, one of the largest institutional allocations planned for the sector.
They also suggest the $132 billion California State Teachers Retirement System not just invest passively in commodity indexes -- as institutional investors have typically done in the past -- but also in actively-managed hedge funds and physical production of raw materials, according to a paper used earlier this month to brief its pensions board.
"Rather than passively investing in commodities, staff advocates a range of active strategies to potentially hedge inflation, profit from commodity price moves up or down and reduce volatility," Calstrs' investment committee staff said in the paper, a copy of which was obtained by Reuters on Thursday.
In a more detailed recommendation to the Calstrs board three months after it voted in favor of a commodities investment, the committee recommended allocating up to 1.5 percent of its assets to commodities over three to five years, rising from below $150 million in the first year to nearly $2.5 billion by the third year.
An investment staff at Calstrs said the board was to be briefed again on the commodities investment plan in October.
"At this point, no decision has been made as yet," the staff said, stressing the plan was still in discussion stage.
The paper presented to Calstrs' board is among the best evidence yet that major institutional investors are still interested in expanding the estimated $300 billion that has been invested in commodity markets over the past decade.
But the approach toward the sector may be changing, as new strategies are sought to maximize returns at a time of highly correlated performance and negative roll returns on futures.
While the first wave of investment years ago had bet commodity markets would offer diversification from equities and bonds, that argument broke down as many markets moved in sync.
The staff recommended that Calstrs adopt a three-pronged strategy comprised of investments in commodity index futures and swaps; hedge funds and trend-following funds; and physical commodity-producing partnerships.
"For example, in the first year of implementation, it is expected that commodities investments would only amount to less than $150 million, but grow to nearly $2.5 billion by the end of Year 3," the said the paper, presented by Calstrs investment staff Carrie Lo and Steven Tong and endorsed by Chief Investment Officer Christopher Ailman.
Calstrs's investment team recommended using the Dow Jones UBS index .DJUBS for the pensions' index futures portfolio, saying it had a more balanced exposure to the different commodity sectors than the energy-dominant SPGSCI .SPGSCI.
Calstrs' foray into commodities is expected to come under its Absolute Return asset class, which targets about 5 percent of the fund's assets, or just under $7 billion.
The investment staff at Calstrs also gave their board the option of having a smaller trial investment of $300 million to $500 million for commodities in a different asset class, although they said they preferred a bigger allocation.
(Reporting by Barani Krishnan; Editing by Alden Bentley)
NEWS - Commodites, Agriculture, Green Investment - NEWS
9/26/2010
Credit Suisse commods team leaves to form own fund
NEW YORK (Reuters) - A top Credit Suisse (CSGN.VX) commodity trader is leaving the bank, along with a team of proprietary traders, to set up a hedge fund backed by $150 million from private investment firm Blackstone Group (BX.N), two people familiar with the matter said.
The move by George 'Beau' Taylor, a rainmaker renowned for making big bets on energy markets at a series of Wall Street firms, is the latest response to U.S. lawmakers in July passing new rules cracking down on speculative trading.
Eight people will be leaving the bank, including Taylor, the global head of commodities arbitrage trading, and Trevor Woods, head of energy arbitrage trading.
Credit Suisse and Blackstone declined to comment on the moves, which were first reported by the Wall Street Journal on its website on Thursday.
Investment banks like Credit Suisse with proprietary trading desks are looking a hard look at their trading businesses and whether they comply with the so-called Volcker rule, part of broader financial reforms designed to rein in banks from making risky bets with their own capital.
Credit Suisse's proprietary-trader ranks have thinned from as many as 250 to just 100, a person familiar with the firm told Reuters.
The Volcker rule is widely expected to shake loose a number of trading teams from banks, creating opportunities for investment firms like Blackstone to help launch and take stakes in new hedge funds.
Last month, JPMorgan Chase & Co (JPM.N) told its proprietary commodities traders that their desk will be shut down, as it looks to comply with new U.S. banking laws. Other proprietary desks will also be shut down over time, one source said at the time.
The move by George 'Beau' Taylor, a rainmaker renowned for making big bets on energy markets at a series of Wall Street firms, is the latest response to U.S. lawmakers in July passing new rules cracking down on speculative trading.
Eight people will be leaving the bank, including Taylor, the global head of commodities arbitrage trading, and Trevor Woods, head of energy arbitrage trading.
Credit Suisse and Blackstone declined to comment on the moves, which were first reported by the Wall Street Journal on its website on Thursday.
Investment banks like Credit Suisse with proprietary trading desks are looking a hard look at their trading businesses and whether they comply with the so-called Volcker rule, part of broader financial reforms designed to rein in banks from making risky bets with their own capital.
Credit Suisse's proprietary-trader ranks have thinned from as many as 250 to just 100, a person familiar with the firm told Reuters.
The Volcker rule is widely expected to shake loose a number of trading teams from banks, creating opportunities for investment firms like Blackstone to help launch and take stakes in new hedge funds.
Last month, JPMorgan Chase & Co (JPM.N) told its proprietary commodities traders that their desk will be shut down, as it looks to comply with new U.S. banking laws. Other proprietary desks will also be shut down over time, one source said at the time.
Commodities Outlook Is ‘Constructive,’ Barclays Says
Sept. 23 (Bloomberg) -- Commodities have a “constructive” outlook, with supply constraints set to become a more dominant theme in the fourth quarter, Barclays Capital said.
Demand for coal, aluminum, coffee, copper, crude oil, corn, sugar and soybeans probably will climb to a record this year, analyst Kevin Norrish said today at a presentation in London. The Reuters/Jefferies CRB Index of 19 raw materials is headed for its best performance in the current quarter since last year’s final three months.
“We are pretty positive on commodities for the rest of this year,” Norrish said. “Copper is looking very strong.”
The CRB Index fell in this year’s first six months on concern that the world economic recovery rebound might falter because of slower Chinese growth and budget deficits in Europe. The gauge has added 8.2 percent in the third quarter as gold climbed to a record, cotton rose to the highest price since 1995 and wheat surged.
“The current quarter has proved the strongest for commodity investments so far this year, and we expect further upside price risk in a number of markets heading into the fourth quarter, especially in oil and base metals, but in some agriculture markets as well,” Barclays Capital said in a global outlook report e-mailed today.
Chinese Economy
Raw materials slid in the second quarter as China, the world’s largest consumer of copper, energy and iron ore, took steps to curb its real-estate market. An index of the six main industrial metals traded on the London Metal Exchange dropped 16 percent in the period, the most since the fourth quarter of 2008.
“China’s policy-induced slowdown is showing signs of stabilizing,” Barclays Capital said in the report.
Supply limits will help industrial metals perform well for the rest of 2010, particularly copper and tin, as well as agricultural commodities, Norrish said. He also pointed to demand from emerging markets.
Copper for delivery in three months reached a five-month high on the LME today as inventories monitored by the exchange headed for a 31st weekly decline in a row. The ratio of stocks to consumption probably will fall to an all-time low in 2011’s second quarter, due mainly to Chinese demand, Norrish said.
Copper, Tin
Immediate-delivery copper’s discount to the three-month price, the so-called contango, shrank to $1 a metric ton today, according to LME figures. The spread was at $7.50 in the prior session. A near-term price higher than longer-dated contracts, known as a backwardation, may signal concern about scarcity.
“We are seeing these markets starting to really look quite tight,” Norrish said. “Contangos are starting to tighten up now and are moving into backwardation, which is a classic signal that physical supply and demand is starting to really make an impact.”
The market for tin is “probably as tight as copper,” Norrish said. He predicted an average price for immediate- delivery metal of almost $27,000 a ton in next year’s second quarter. Cash tin traded at $23,645 at 12:55 p.m. in London today. The CRB Index was last up 0.3 percent at 279.77 points.
--With assistance from Claudia Carpenter in London. Editors: Dan Weeks, Claudia Carpenter.
To contact the reporter on this story: Anna Stablum in London at astablum@bloomberg.net
To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net.
Demand for coal, aluminum, coffee, copper, crude oil, corn, sugar and soybeans probably will climb to a record this year, analyst Kevin Norrish said today at a presentation in London. The Reuters/Jefferies CRB Index of 19 raw materials is headed for its best performance in the current quarter since last year’s final three months.
“We are pretty positive on commodities for the rest of this year,” Norrish said. “Copper is looking very strong.”
The CRB Index fell in this year’s first six months on concern that the world economic recovery rebound might falter because of slower Chinese growth and budget deficits in Europe. The gauge has added 8.2 percent in the third quarter as gold climbed to a record, cotton rose to the highest price since 1995 and wheat surged.
“The current quarter has proved the strongest for commodity investments so far this year, and we expect further upside price risk in a number of markets heading into the fourth quarter, especially in oil and base metals, but in some agriculture markets as well,” Barclays Capital said in a global outlook report e-mailed today.
Chinese Economy
Raw materials slid in the second quarter as China, the world’s largest consumer of copper, energy and iron ore, took steps to curb its real-estate market. An index of the six main industrial metals traded on the London Metal Exchange dropped 16 percent in the period, the most since the fourth quarter of 2008.
“China’s policy-induced slowdown is showing signs of stabilizing,” Barclays Capital said in the report.
Supply limits will help industrial metals perform well for the rest of 2010, particularly copper and tin, as well as agricultural commodities, Norrish said. He also pointed to demand from emerging markets.
Copper for delivery in three months reached a five-month high on the LME today as inventories monitored by the exchange headed for a 31st weekly decline in a row. The ratio of stocks to consumption probably will fall to an all-time low in 2011’s second quarter, due mainly to Chinese demand, Norrish said.
Copper, Tin
Immediate-delivery copper’s discount to the three-month price, the so-called contango, shrank to $1 a metric ton today, according to LME figures. The spread was at $7.50 in the prior session. A near-term price higher than longer-dated contracts, known as a backwardation, may signal concern about scarcity.
“We are seeing these markets starting to really look quite tight,” Norrish said. “Contangos are starting to tighten up now and are moving into backwardation, which is a classic signal that physical supply and demand is starting to really make an impact.”
The market for tin is “probably as tight as copper,” Norrish said. He predicted an average price for immediate- delivery metal of almost $27,000 a ton in next year’s second quarter. Cash tin traded at $23,645 at 12:55 p.m. in London today. The CRB Index was last up 0.3 percent at 279.77 points.
--With assistance from Claudia Carpenter in London. Editors: Dan Weeks, Claudia Carpenter.
To contact the reporter on this story: Anna Stablum in London at astablum@bloomberg.net
To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net.
9/14/2010
The One Commodity Hedge Fund That's Killing It Right Now
David Coolidge of Velite Capital, a Houston-based commodity fund with about $1 billion under management, is outperforming almost the entire hedge fund industry right now.
In August, Velite was up 20%, according to an e-mail sent to investors that was obtained by Bloomberg.
That means he outperformed other commodity funds, which are down on average of -1.5% this year and the entire hedge fund industry, which returned on average .4% on average in August, by a mile.
The fund wouldn't answer any questions when Bloomberg called, and this fund has been under the radar until now, so we know barely anything about Coolidge or his strategy, other than the fund specializes in oil and energy trading and the guess out there is that he was pretty short 2011 natural gas.
But this might be a lead. The one Houston-based David Coolidge on Facebook looks like he fits the bill.
He "likes" PETCO and Dr. Paul Dyer, a new-agey self help guru who helps people become more passionate about their life in 12 weeks.
And here's what we found out about Velite.
Coolidge founded it in 2005.
The "Velites" were a class of infantry in the Polybian legions of the early Roman republic.
Some of the other people working there include Kelly Hill, a former energy trader and the director of operations, Clifton White, a former trader and Velite's "fundamental analyst," Brad King, the vice president, Stephen Naehr, the director of analytics, and Kyle Cooper, the managing director.
Coolidge's August performance seems unique and impressive for now, but he might just be the first energy success story we're hearing about.
In August, Velite was up 20%, according to an e-mail sent to investors that was obtained by Bloomberg.
That means he outperformed other commodity funds, which are down on average of -1.5% this year and the entire hedge fund industry, which returned on average .4% on average in August, by a mile.
The fund wouldn't answer any questions when Bloomberg called, and this fund has been under the radar until now, so we know barely anything about Coolidge or his strategy, other than the fund specializes in oil and energy trading and the guess out there is that he was pretty short 2011 natural gas.
But this might be a lead. The one Houston-based David Coolidge on Facebook looks like he fits the bill.
He "likes" PETCO and Dr. Paul Dyer, a new-agey self help guru who helps people become more passionate about their life in 12 weeks.
And here's what we found out about Velite.
Coolidge founded it in 2005.
The "Velites" were a class of infantry in the Polybian legions of the early Roman republic.
Some of the other people working there include Kelly Hill, a former energy trader and the director of operations, Clifton White, a former trader and Velite's "fundamental analyst," Brad King, the vice president, Stephen Naehr, the director of analytics, and Kyle Cooper, the managing director.
Coolidge's August performance seems unique and impressive for now, but he might just be the first energy success story we're hearing about.
9/13/2010
Alarm bells at sovereign funds' farmlands foray
16 Aug, 2010 11:28 AM
SOVEREIGN wealth funds have become the central issue in the debate over foreigners buying up rural properties in Australia.
While there are many examples of foreigners buying land in the past couple of years, Qatar-based Hassad Food, which is backed by the Qatar Investment Authority, exemplifies sovereign wealth funds buying up rural land in Australia to feed not only Qatar but other Middle Eastern countries concerned about food security.
Hassad has bought more than $40 million worth of sheep stations in northern NSW and South Australia in the past six months and intends to increase its land holding, according to The Australian Financial Review.
The federal Minister for Agriculture, Tony Burke, has emphasised the value of foreign investment in the agricultural sector, saying investments by international agricultural and food groups "have allowed our farmers to maximise the prices they receive for the products they produce".
But Liberal senator Bill Heffernan warns sovereign wealth funds need to be watched because some were "already acquiring other sovereigns' wealth to protect their own food security tasks".
SOVEREIGN wealth funds have become the central issue in the debate over foreigners buying up rural properties in Australia.
While there are many examples of foreigners buying land in the past couple of years, Qatar-based Hassad Food, which is backed by the Qatar Investment Authority, exemplifies sovereign wealth funds buying up rural land in Australia to feed not only Qatar but other Middle Eastern countries concerned about food security.
Hassad has bought more than $40 million worth of sheep stations in northern NSW and South Australia in the past six months and intends to increase its land holding, according to The Australian Financial Review.
The federal Minister for Agriculture, Tony Burke, has emphasised the value of foreign investment in the agricultural sector, saying investments by international agricultural and food groups "have allowed our farmers to maximise the prices they receive for the products they produce".
But Liberal senator Bill Heffernan warns sovereign wealth funds need to be watched because some were "already acquiring other sovereigns' wealth to protect their own food security tasks".
9/08/2010
Indian firms foray into Latin America’s agri business
Published: 7 September 2010
NEW DELHI: Indian companies are increasingly getting a foothold into South America, acquiring assets and land not just to get entry into its lucrative agricultural market but also to export commodities such as sugar, pulses and edible oils back to India.
According to Latin American diplomats serving in New Delhi, Indian company Shree Renuka Sugars recently made it to the club of top five sugar producers in Brazil, South America’s largest country and world’s biggest sugarcane producer.
India’s largest sugar refiner, Shree Renuka Sugars had first bought a sugar and ethanol producer Vale Do Ivai S.A. Acucar E Alcool in November 2009 for $240 million, including its 18,000 hectares of land and cane crushing capacity of 3.1 million tonnes annually.
A few months later, in February, it invested another $329 million for a 51-percent stake in Equipav SA Acucar e Alcool, that owns two sugar mills with 10.5 million tonnes annual capacity, as well as, 115,000 hectares of cane growing land in south-eastern Brazil.
The diplomats said other Indian companies are also vying to get into the lucrative sugar industry, such as the consortium led by state-run Bharat Petroleum Corp, as also private sugar companies like Rajashree and Godavari, looking at cane estates and ethanol plants.
Mumbai-based Bajaj Hindusthan already has a subsidiary in Brazil, Bajaj Internacional Participators Ltd, to scout for investment opportunities in the country. But, it’s not just sugar and Brazil, which are attracting Indian corporate groups.
“It is a natural synergy for Indian companies to look at South America for agriculture. Cultivable land is at a premium in India and growing food overseas to import it back to the country is win-win for both sides,” said a senior diplomat, requesting anonymity.
“Frankly, there is also not much sensitivity about the issue of land in South America due to the low population, unlike, say, in Africa where it is often a political hot potato,” the diplomat added.
Interests in sugar and ethanol aside, Sterling Group has a 2,000 hectare olive farm in Argentina, while Solvent Extractors Associations of India — made up of 16 member companies — plans to invest $50 million to grow oilseeds in Uruguay.
Olam, a company owned by a non-resident Indian with headquarters in Brazil, cultivates 30,000 hectares of peanut production in Argentina.
In a similar development, Indian companies are also increasingly looking for farm assets abroad in Latin America for import of pulses, edible oils and sugar in recent years. In 2009, India imported over $1 billion worth of edible oils from Brazil.
South America, of course, has the advantage of large surplus of land and no restrictions on foreigners acquiring this asset. It has 25 percent of world’s freshwater reserves and there is little need to bring farm technology, thanks to a sophisticated research system.
Further, the cost of land in South America is also often much less than its equivalent in India, said the diplomat.
“The cost of land generally in South America is half the cost of land, say in Punjab. The most fertile land is costing around $12000 a hectare , while fallow land can be bought for as little as a few hundred dollars a hectare.”
NEW DELHI: Indian companies are increasingly getting a foothold into South America, acquiring assets and land not just to get entry into its lucrative agricultural market but also to export commodities such as sugar, pulses and edible oils back to India.
According to Latin American diplomats serving in New Delhi, Indian company Shree Renuka Sugars recently made it to the club of top five sugar producers in Brazil, South America’s largest country and world’s biggest sugarcane producer.
India’s largest sugar refiner, Shree Renuka Sugars had first bought a sugar and ethanol producer Vale Do Ivai S.A. Acucar E Alcool in November 2009 for $240 million, including its 18,000 hectares of land and cane crushing capacity of 3.1 million tonnes annually.
A few months later, in February, it invested another $329 million for a 51-percent stake in Equipav SA Acucar e Alcool, that owns two sugar mills with 10.5 million tonnes annual capacity, as well as, 115,000 hectares of cane growing land in south-eastern Brazil.
The diplomats said other Indian companies are also vying to get into the lucrative sugar industry, such as the consortium led by state-run Bharat Petroleum Corp, as also private sugar companies like Rajashree and Godavari, looking at cane estates and ethanol plants.
Mumbai-based Bajaj Hindusthan already has a subsidiary in Brazil, Bajaj Internacional Participators Ltd, to scout for investment opportunities in the country. But, it’s not just sugar and Brazil, which are attracting Indian corporate groups.
“It is a natural synergy for Indian companies to look at South America for agriculture. Cultivable land is at a premium in India and growing food overseas to import it back to the country is win-win for both sides,” said a senior diplomat, requesting anonymity.
“Frankly, there is also not much sensitivity about the issue of land in South America due to the low population, unlike, say, in Africa where it is often a political hot potato,” the diplomat added.
Interests in sugar and ethanol aside, Sterling Group has a 2,000 hectare olive farm in Argentina, while Solvent Extractors Associations of India — made up of 16 member companies — plans to invest $50 million to grow oilseeds in Uruguay.
Olam, a company owned by a non-resident Indian with headquarters in Brazil, cultivates 30,000 hectares of peanut production in Argentina.
In a similar development, Indian companies are also increasingly looking for farm assets abroad in Latin America for import of pulses, edible oils and sugar in recent years. In 2009, India imported over $1 billion worth of edible oils from Brazil.
South America, of course, has the advantage of large surplus of land and no restrictions on foreigners acquiring this asset. It has 25 percent of world’s freshwater reserves and there is little need to bring farm technology, thanks to a sophisticated research system.
Further, the cost of land in South America is also often much less than its equivalent in India, said the diplomat.
“The cost of land generally in South America is half the cost of land, say in Punjab. The most fertile land is costing around $12000 a hectare , while fallow land can be bought for as little as a few hundred dollars a hectare.”
Burry, predictor of mortgage collapse, bets on farmland, gold
Michael Burry, former head of Scion Capital Group, works at his office at his home in Cupertino, California. Photographer: Tony Avelar/Bloomberg
Bloomberg | Sep 7, 2010
By Jon Erlichman and Dakin Campbell
Sept. 7 (Bloomberg) — Michael Burry, the former head of Scion Capital LLC who predicted the housing market’s plunge, talks with Bloomberg’s Jon Erlichman about his investments in agricultural land, real estate and gold. (This is an excerpt. Source: Bloomberg) - Play Video
Michael Burry, the former hedge-fund manager who predicted the housing market’s plunge, said he is investing in farmable land, small technology companies and gold as he hunts original ideas and braces for a weaker dollar.
“I believe that agriculture land — productive agricultural land with water on site — will be very valuable in the future,” Burry, 39, said in a Bloomberg Television interview scheduled for broadcast this morning in New York. “I’ve put a good amount of money into that.”
Burry, as head of Scion Capital LLC, prodded Wall Street banks in early 2005 to create credit-default swaps to bet against bonds backed by the riskiest home loans. The strategy paid off as borrowers defaulted, letting his investors more than quintuple their money from 2000 to 2008, according to Michael Lewis’s book “The Big Short” (Norton/Allen Lane).
Burry, who now manages his own money after shuttering the fund in 2008, said finding original investments is difficult because many trades are crowded and asset classes often move together.
“I’m interested in finding investments that aren’t just simply going to float up and down with the market,” he said. “The incredible correlation that we’re experiencing — we’ve been experiencing for a number of years — is problematic.”
Still, it’s possible to find opportunities among small companies because large investors and government officials focus on bigger ones, he said. He is particularly interested in small technology firms.
“Smaller companies in Asia, I think, are neglected,” he said. “There are some very cheap companies there.”
Investing in Gold
Gold is also a favored investment as central banks issue debt and devalue their currencies, he said. Governments haven’t adequately addressed the causes of the financial crisis and may be sowing the seeds for future problems by borrowing, he said. In the U.S., lawmakers showed they didn’t understand how to prevent another crisis when they gave the Federal Reserve and Chairman Ben S. Bernanke additional authority, he said.
“The Federal Reserve, in my view, hadn’t seen this coming and in some ways, possibly contributed to the crisis,” he said. “Now, Bernanke is the most powerful Fed chairman in history. I’m not sure that’s the right response. The result tends to tell me they’re not getting it right.”
The Dodd-Frank Act, signed by President Barack Obama on July 21, creates a consumer bureau at the Fed to monitor banks for credit-card and mortgage lending abuses. The bill also gives the Fed chairman a seat on a newly created Financial Stability Oversight Council, which is supposed to spot and respond to emerging systemic risks.
Background in Medicine
Originally, investing was a hobby for Burry, who as a resident neurosurgeon at Stanford Hospital in the 1990s typed his ideas onto message boards late at night.
He went to high school in San Jose, California, graduated from the University of California, Los Angeles and then earned a medical degree from the Vanderbilt University School of Medicine, according to “The Big Short.” The book portrays him as a loner from a young age who excelled in areas that required intense concentration. While searching for undervalued companies, he discovered his own house was overpriced, prompting a broader investigation of the housing market.
It’s possible Burry is part of “an extremely small group” of economists and investors who are “really exceptionally adroit” at forecasting, former fed Chairman Alan Greenspan said in April. Burry has been critical of the role Greenspan played in fueling the crisis with low interest rates.
Goldman Sachs
Burry said Wall Street investment banks such as Goldman Sachs Group Inc. shouldn’t trade on their own account and don’t always act in the best interests of clients. The firm is disbanding its principal-strategies business, one of the groups that make bets with the company’s own money, two people with knowledge of the decision said last week.
“I don’t believe that any Wall Street bank always acts in the best interests of its clients,” said Burry, adding that he often fought with firms while betting against housing. “It’s an incredibly vicious, incredibly competitive world when you’re going to go take a position opposite one of those banks.”
He asked seven Wall Street banks to help him bet against the housing market, and only Deutsche Bank AG and Goldman Sachs expressed any interest, Lewis wrote in his book. At the end of June 2008, original investors in Burry’s hedge fund received a return on their money, after fees and expenses, of 489.34 percent, according to the book.
Bloomberg | Sep 7, 2010
By Jon Erlichman and Dakin Campbell
Sept. 7 (Bloomberg) — Michael Burry, the former head of Scion Capital LLC who predicted the housing market’s plunge, talks with Bloomberg’s Jon Erlichman about his investments in agricultural land, real estate and gold. (This is an excerpt. Source: Bloomberg) - Play Video
Michael Burry, the former hedge-fund manager who predicted the housing market’s plunge, said he is investing in farmable land, small technology companies and gold as he hunts original ideas and braces for a weaker dollar.
“I believe that agriculture land — productive agricultural land with water on site — will be very valuable in the future,” Burry, 39, said in a Bloomberg Television interview scheduled for broadcast this morning in New York. “I’ve put a good amount of money into that.”
Burry, as head of Scion Capital LLC, prodded Wall Street banks in early 2005 to create credit-default swaps to bet against bonds backed by the riskiest home loans. The strategy paid off as borrowers defaulted, letting his investors more than quintuple their money from 2000 to 2008, according to Michael Lewis’s book “The Big Short” (Norton/Allen Lane).
Burry, who now manages his own money after shuttering the fund in 2008, said finding original investments is difficult because many trades are crowded and asset classes often move together.
“I’m interested in finding investments that aren’t just simply going to float up and down with the market,” he said. “The incredible correlation that we’re experiencing — we’ve been experiencing for a number of years — is problematic.”
Still, it’s possible to find opportunities among small companies because large investors and government officials focus on bigger ones, he said. He is particularly interested in small technology firms.
“Smaller companies in Asia, I think, are neglected,” he said. “There are some very cheap companies there.”
Investing in Gold
Gold is also a favored investment as central banks issue debt and devalue their currencies, he said. Governments haven’t adequately addressed the causes of the financial crisis and may be sowing the seeds for future problems by borrowing, he said. In the U.S., lawmakers showed they didn’t understand how to prevent another crisis when they gave the Federal Reserve and Chairman Ben S. Bernanke additional authority, he said.
“The Federal Reserve, in my view, hadn’t seen this coming and in some ways, possibly contributed to the crisis,” he said. “Now, Bernanke is the most powerful Fed chairman in history. I’m not sure that’s the right response. The result tends to tell me they’re not getting it right.”
The Dodd-Frank Act, signed by President Barack Obama on July 21, creates a consumer bureau at the Fed to monitor banks for credit-card and mortgage lending abuses. The bill also gives the Fed chairman a seat on a newly created Financial Stability Oversight Council, which is supposed to spot and respond to emerging systemic risks.
Background in Medicine
Originally, investing was a hobby for Burry, who as a resident neurosurgeon at Stanford Hospital in the 1990s typed his ideas onto message boards late at night.
He went to high school in San Jose, California, graduated from the University of California, Los Angeles and then earned a medical degree from the Vanderbilt University School of Medicine, according to “The Big Short.” The book portrays him as a loner from a young age who excelled in areas that required intense concentration. While searching for undervalued companies, he discovered his own house was overpriced, prompting a broader investigation of the housing market.
It’s possible Burry is part of “an extremely small group” of economists and investors who are “really exceptionally adroit” at forecasting, former fed Chairman Alan Greenspan said in April. Burry has been critical of the role Greenspan played in fueling the crisis with low interest rates.
Goldman Sachs
Burry said Wall Street investment banks such as Goldman Sachs Group Inc. shouldn’t trade on their own account and don’t always act in the best interests of clients. The firm is disbanding its principal-strategies business, one of the groups that make bets with the company’s own money, two people with knowledge of the decision said last week.
“I don’t believe that any Wall Street bank always acts in the best interests of its clients,” said Burry, adding that he often fought with firms while betting against housing. “It’s an incredibly vicious, incredibly competitive world when you’re going to go take a position opposite one of those banks.”
He asked seven Wall Street banks to help him bet against the housing market, and only Deutsche Bank AG and Goldman Sachs expressed any interest, Lewis wrote in his book. At the end of June 2008, original investors in Burry’s hedge fund received a return on their money, after fees and expenses, of 489.34 percent, according to the book.
9/06/2010
Henderson launches agriculture hedge fund
The fund focuses on relative value, a niche strategy within the asset class. The portfolio managers identify and exploit pricing anomalies within and between soft commodity derivative markets (ie futures and options), as well as trading and investing in agricultural and related commodities.
“In order to ensure the portfolio remains liquid, the managers trade only exchange traded contracts in major agricultural commodities on the largest global exchanges. Consequently the fund has no gate and allows greater transparency for clients,” Hendersin said.
Henderson Global Investors (Henderson) has launched the Henderson Agricultural Fund, a Cayman domiciled hedge fund. The fund is co-managed by Attunga Capital, a specialist investment manager based in Australia. Henderson Group, the parent of Henderson Global Investors, has held a minority stake in Attunga since November 2008.
“The Henderson Agricultural Fund will be marketed through Henderson’s global distribution capabilities to institutional investors and will provide access to Attunga’s proven agriculture investment strategy. The fund was launched with capital from highly regarded institutional clients,” the asset manager said in a statement on its website.
The fund focuses on relative value, a niche strategy within the asset class. The portfolio managers identify and exploit pricing anomalies within and between soft commodity derivative markets (ie futures and options), as well as trading and investing in agricultural and related commodities. A parallel fund, launched by Attunga in 2008, has provided annualised returns of 14.1 per cent with annualised standard deviation of 9.1 per cent.
“In order to ensure the portfolio remains liquid, the managers trade only exchange traded contracts in major agricultural commodities on the largest global exchanges. Consequently the fund has no gate and allows greater transparency for clients,” Henderson said.
“The fund can provide opportunities for diversification in a broader portfolio as its relative value investment strategy has low correlation with the broader agriculture markets as well as other asset classes,” it added.
Commenting on the fund launch, Arno Kitts, head of institutional business at Henderson said: “Agriculture is an exciting asset class incorporating, amongst others, food and fuel, the prices of which are influenced by a wide number of social, political and financial factors. Attunga has broad expertise and is highly experienced in this area of investment and we are pleased to be adding the Henderson Agricultural Fund to our stable of hedge fund products.”
“In order to ensure the portfolio remains liquid, the managers trade only exchange traded contracts in major agricultural commodities on the largest global exchanges. Consequently the fund has no gate and allows greater transparency for clients,” Hendersin said.
Henderson Global Investors (Henderson) has launched the Henderson Agricultural Fund, a Cayman domiciled hedge fund. The fund is co-managed by Attunga Capital, a specialist investment manager based in Australia. Henderson Group, the parent of Henderson Global Investors, has held a minority stake in Attunga since November 2008.
“The Henderson Agricultural Fund will be marketed through Henderson’s global distribution capabilities to institutional investors and will provide access to Attunga’s proven agriculture investment strategy. The fund was launched with capital from highly regarded institutional clients,” the asset manager said in a statement on its website.
The fund focuses on relative value, a niche strategy within the asset class. The portfolio managers identify and exploit pricing anomalies within and between soft commodity derivative markets (ie futures and options), as well as trading and investing in agricultural and related commodities. A parallel fund, launched by Attunga in 2008, has provided annualised returns of 14.1 per cent with annualised standard deviation of 9.1 per cent.
“In order to ensure the portfolio remains liquid, the managers trade only exchange traded contracts in major agricultural commodities on the largest global exchanges. Consequently the fund has no gate and allows greater transparency for clients,” Henderson said.
“The fund can provide opportunities for diversification in a broader portfolio as its relative value investment strategy has low correlation with the broader agriculture markets as well as other asset classes,” it added.
Commenting on the fund launch, Arno Kitts, head of institutional business at Henderson said: “Agriculture is an exciting asset class incorporating, amongst others, food and fuel, the prices of which are influenced by a wide number of social, political and financial factors. Attunga has broad expertise and is highly experienced in this area of investment and we are pleased to be adding the Henderson Agricultural Fund to our stable of hedge fund products.”
9/03/2010
Aluminium ETP awaits regulatory approval
* ETP planned by Glencore, Credit Suisse
* Likely to be listed on a Swiss Exchange
By Polly Yam and Nick Trevethan
HONG KONG/SINGAPORE, Aug 17 (Reuters) - A physically-backed aluminium exchange-traded product (ETP) planned by Glencore International [GLEN.UL] and Credit Suisse is likely to be launched on a Swiss exchange, a source familiar with the matter said.
Swiss-based Glencore, the world's biggest commodity trader, and Credit Suisse declined to comment. The size of the ETP, which would allow investors to invest in aluminium without the complications of managing a physical stockpile or repeatedly rolling forward contracts on the London Metal Exchange (LME), would depend on how popular the fund proves to be.
The ETP would buy metal only after investors purchase units.
ETP is an umbrella term covering exchange traded funds (ETF) and exchange traded notes (ETN).
"(The launch) has been waiting for the final approval (from the local regulator) for ages. The ETF can be launched the day the regulator agrees," the source said on Tuesday.
He said the two essential processes of organizing the ETP -- securing suppliers of the metal and finding a warehousing system to stock it -- had been arranged. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
For a graphic on global metals stocks, see:
http://graphics.thomsonreuters.com/10/GLB_MTLSTK.html ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
Although the fund itself may not have stocked up on any metal yet, market watchers say a steady fall in LME stocks over the past three months may be the result of potential suppliers acquiring material with which they could start the investment vehicle.
"There is no shortage of aluminium and the steady deliveries out of LME warehouses may be low-level buying by someone linked to the ETF putting together a stockpile," a trader in Sydney said.
Several industry sources told Reuters last year that Glencore and Credit Suisse were planning an aluminium ETP. [ID:nLH639020]
ETPs have proven popular for precious metals, as many investors regard them as cheaper, easier and safer than derivatives contracts. [GOL/SPDR]
A senior executive at Russia's UC RUSAL <0486.HK>, the world's biggest aluminium producer, said in April that the firm was also considering an aluminium ETF. [ID:nTOE63B079] (Additional reporting by Pratima Desai in London, editing by Anthony Barker) ((polly.yam@thomsonreuters.com; +852 2843 6933; Reuters Messaging: polly.yam.reuters.com@reuters.net)) ((If you have a query or comment on this story, send an email to news.feedback.asia@thomsonreuters.com))
* Likely to be listed on a Swiss Exchange
By Polly Yam and Nick Trevethan
HONG KONG/SINGAPORE, Aug 17 (Reuters) - A physically-backed aluminium exchange-traded product (ETP) planned by Glencore International [GLEN.UL] and Credit Suisse
Swiss-based Glencore, the world's biggest commodity trader, and Credit Suisse declined to comment. The size of the ETP, which would allow investors to invest in aluminium without the complications of managing a physical stockpile or repeatedly rolling forward contracts on the London Metal Exchange (LME), would depend on how popular the fund proves to be.
The ETP would buy metal only after investors purchase units.
ETP is an umbrella term covering exchange traded funds (ETF) and exchange traded notes (ETN).
"(The launch) has been waiting for the final approval (from the local regulator) for ages. The ETF can be launched the day the regulator agrees," the source said on Tuesday.
He said the two essential processes of organizing the ETP -- securing suppliers of the metal and finding a warehousing system to stock it -- had been arranged. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
For a graphic on global metals stocks, see:
http://graphics.thomsonreuters.com/10/GLB_MTLSTK.html ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
Although the fund itself may not have stocked up on any metal yet, market watchers say a steady fall in LME stocks over the past three months may be the result of potential suppliers acquiring material with which they could start the investment vehicle.
"There is no shortage of aluminium and the steady deliveries out of LME warehouses may be low-level buying by someone linked to the ETF putting together a stockpile," a trader in Sydney said.
Several industry sources told Reuters last year that Glencore and Credit Suisse were planning an aluminium ETP. [ID:nLH639020]
ETPs have proven popular for precious metals, as many investors regard them as cheaper, easier and safer than derivatives contracts. [GOL/SPDR]
A senior executive at Russia's UC RUSAL <0486.HK>, the world's biggest aluminium producer, said in April that the firm was also considering an aluminium ETF. [ID:nTOE63B079] (Additional reporting by Pratima Desai in London, editing by Anthony Barker) ((polly.yam@thomsonreuters.com; +852 2843 6933; Reuters Messaging: polly.yam.reuters.com@reuters.net)) ((If you have a query or comment on this story, send an email to news.feedback.asia@thomsonreuters.com))
Potash investors eye 25 pct lift to BHP bid
* Shareholders think deal could be done at $162
* Believe deal is likely to go through
* Think chances of rival bid are slim
* Analysts predict deal at $157 per share
* For the latest news click on [ID:nN22340110]
By Cecilia Valente and Eric Onstad
LONDON, Aug 20 (Reuters) - Investors in Canada's Potash Corp think BHP Billiton could succeed in its bid for the company if it sweetens its $39-billion offer by a quarter, according to a Reuters poll.
Asked at what price a takeover could happen, a sample of 11 global shareholders produced an average answer at $162 per share, against the $130 offer on the table.
Separately, a Reuters poll of 15 analysts in North America and in Europe found that the industry specialists believe a deal could be done at $157.
This week Potash's board rejected the Australian mining giant's offer, prompting BHP to approach directly investors in the world's largest fertiliser producer. [ID:nN22340110]
No analysts believed that BHP would be successful with its initial bid.
"I don't think for one moment that BHP thought that $130 would be the knock-out blow," said analyst Paul Galloway at Bernstein Research in London.
Even though the investors polled were expecting an upgrade on price, they are also pretty confident a deal would get done eventually.
Of the six investors who commented on the probability of a successful takeover, two put it at 70 percent, one at 75 and another said the chances were "medium to high", while another two reckoned it was 50-50.
The analysts reckoned the takeover had a 72 percent chance of going ahead.
"I would say it would have to get to the $160 to $180 range for there to be a potential for a deal," said Paul Taylor, chief investment officer at BMO Harris Investment Management, which he said holds more than 400,000 shares in Potash.
WHITE KNIGHT?
Shareholders were not holding out great hopes for a rival bidder that could come to Potash's rescue with a higher price, even if one thought it "highly likely".
But there were some who looked to China to throw up a such a white knight, echoing what industry sources have told Reuters. [ID:nTOE67J035]
Asked to put a percentage on the prospects for a rival bid, two respondents from the investor poll went for 25 and 30 percent. For analysts, only three of 15 respondents expected another firm to throw its hat in the ring, with the remainder thinking it impossible or unlikely, or predicting a stake sale to a third party.
"Potash is a great company. For BHP it is a great deal too, it has a lot of cash," said one investor, who believed Rio Tinto as well as Chinese firms could still counter-bid.
"In the long run, people need more grain and beef and that comes from potash," the shareholder said, on condition of anonymity.
The prospect of a full bid by China for the whole company was dismissed by most analysts, including Peter Davey at Ambrian Capital in London.
"I think the Canadian government would take umbrage at that," said Davey, regarding a Chinese counter bid. "You have got to bear in mind that it's like a national champion and all their national champions in the mining world have just been wiped out."
Reuters polled a range of large, medium and small Potash investors, based in North America, Europe and Asia. Their combined holdings equate to about 4.5 million shares or about 1.5 percent of the company.
Responses from investors on price ranged between $130 and $200 per share. The $130 response was given by a fund manager who has a far larger stake in BHP Billiton than in Potash.
The average figure was achieved by using a mid-point when shareholders gave a price range. (Additional reporting by Claire Milhench, Julie Crust and Laurence Fletcher in London, Euan Rocha, Jennifer Kwan and Pav Jordan in Toronto, Faith Hung in Taipei, Chikafumi Hodo in Tokyo, Samuel Shen in Shanghai, Kevin Lim in Singapore and Donny Kwok in Hong Kong) (Editing by Louise Heavens) ((cecilia.valente@thomsonreuters.com; +44 (0)20 75423570; Reuters Messaging: cecilia.valente.thomsonreuters.com@reuters.net))
* Believe deal is likely to go through
* Think chances of rival bid are slim
* Analysts predict deal at $157 per share
* For the latest news click on [ID:nN22340110]
By Cecilia Valente and Eric Onstad
LONDON, Aug 20 (Reuters) - Investors in Canada's Potash Corp
Asked at what price a takeover could happen, a sample of 11 global shareholders produced an average answer at $162 per share, against the $130 offer on the table.
Separately, a Reuters poll of 15 analysts in North America and in Europe found that the industry specialists believe a deal could be done at $157.
This week Potash's board rejected the Australian mining giant's offer, prompting BHP to approach directly investors in the world's largest fertiliser producer. [ID:nN22340110]
No analysts believed that BHP would be successful with its initial bid.
"I don't think for one moment that BHP thought that $130 would be the knock-out blow," said analyst Paul Galloway at Bernstein Research in London.
Even though the investors polled were expecting an upgrade on price, they are also pretty confident a deal would get done eventually.
Of the six investors who commented on the probability of a successful takeover, two put it at 70 percent, one at 75 and another said the chances were "medium to high", while another two reckoned it was 50-50.
The analysts reckoned the takeover had a 72 percent chance of going ahead.
"I would say it would have to get to the $160 to $180 range for there to be a potential for a deal," said Paul Taylor, chief investment officer at BMO Harris Investment Management, which he said holds more than 400,000 shares in Potash.
WHITE KNIGHT?
Shareholders were not holding out great hopes for a rival bidder that could come to Potash's rescue with a higher price, even if one thought it "highly likely".
But there were some who looked to China to throw up a such a white knight, echoing what industry sources have told Reuters. [ID:nTOE67J035]
Asked to put a percentage on the prospects for a rival bid, two respondents from the investor poll went for 25 and 30 percent. For analysts, only three of 15 respondents expected another firm to throw its hat in the ring, with the remainder thinking it impossible or unlikely, or predicting a stake sale to a third party.
"Potash is a great company. For BHP it is a great deal too, it has a lot of cash," said one investor, who believed Rio Tinto
"In the long run, people need more grain and beef and that comes from potash," the shareholder said, on condition of anonymity.
The prospect of a full bid by China for the whole company was dismissed by most analysts, including Peter Davey at Ambrian Capital in London.
"I think the Canadian government would take umbrage at that," said Davey, regarding a Chinese counter bid. "You have got to bear in mind that it's like a national champion and all their national champions in the mining world have just been wiped out."
Reuters polled a range of large, medium and small Potash investors, based in North America, Europe and Asia. Their combined holdings equate to about 4.5 million shares or about 1.5 percent of the company.
Responses from investors on price ranged between $130 and $200 per share. The $130 response was given by a fund manager who has a far larger stake in BHP Billiton than in Potash.
The average figure was achieved by using a mid-point when shareholders gave a price range. (Additional reporting by Claire Milhench, Julie Crust and Laurence Fletcher in London, Euan Rocha, Jennifer Kwan and Pav Jordan in Toronto, Faith Hung in Taipei, Chikafumi Hodo in Tokyo, Samuel Shen in Shanghai, Kevin Lim in Singapore and Donny Kwok in Hong Kong) (Editing by Louise Heavens) ((cecilia.valente@thomsonreuters.com; +44 (0)20 75423570; Reuters Messaging: cecilia.valente.thomsonreuters.com@reuters.net))
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