Commodities hedge funds shrug off money manager woes amid metals boom and oil price uptick

Jessica Morris
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Iron ore rallied at the start of this year (Source: Getty)

Commodities hedge funds shrugged off the problems plaguing other money managers at the start of this year, as investors piled into the long-suffering sector.

Following more than three years of negative sentiment, investors returned to the commodities sector in the middle of last year and have since allocated $5.4bn (£3.7bn), according to data tracker eVestment.

It comes during a torrid time for hedge funds which have had to grapple with the slowing global economy, disappointing performances as well as crowded trades and increasingly disillusioned clients.

Read more: Citigroup says commodities rout is finally over

But commodities hedge funds outperformed their peers in fixed income and credit, equities as well as FX and currencies during the first four months of 2016. The former produced average aggregate returns of 4.1 per cent — compared to the industry benchmark of 0.8 per cent.

"The [commodities] group benefited from a surge of higher prices across the commodity spectrum during the month, something which appeared to hurt larger managed future funds," eVestment said.

Brent crude, the international benchmark recovered around 60 per cent during this period from a 12-year low of $27.1 in January.

Metal prices also enjoyed a rally which has since ground to an abrupt halt, with iron ore, gold and copper all suffering losses in May.

Read more: Goldman Sachs upgrades commodities to neutral as it cuts outlook for equities

Iron ore prices also rallied as higher steel prices encouraged Chinese mills to increase production, and some supply was disrupted in Australia.

Gold also put on a good show amid rising concerns over China and global economic growth prospects, as well as concerns about negative interest rate policies being employed by a number of central banks across the world.

Elsewhere in the commodities sector, copper and sugar also enjoyed small gains.

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