Clive Capital is joining up with Goldman Sachs (NYSE: GS) to create so-called dynamic commodity indexes intended for use by institutional investors, according to a report. Clive Capital is the largest commodity hedge fund to date, and Goldman is already marketing the index to clients.
The latest “smart index,” which mimics active management as the index will change as managers screen for the best performers, will be marketed to risk-averse institutional investors. Pension funds, foundations and endowments are the types of capital pools this index is intended for. [Have You Considered the Equal Weight ETF Style?]
“Rather than exposing the investor, as the marketing implies, to the best of both worlds — predictability, transparency and the superior returns of an actively managed commodity fund — the indices potentially expose investors to the worst of both approaches,” says a critical John Kemp at Reuters, as reported by Izabella Kaminska at Financial Times. [Fundamental Indexing Quiets Its Critics.]
The general idea is that Clive Capital will determine the weighting within certain commodities in the index each month, deciding how much money to allocate into which commodity.
The argument is that an index “wrapper” or “screen” may not be enough to mitigate the risk that has been present in other commodity indexes. Time will tell if the incorporation of active management is enough to provide outperformance.
Tisha Guerrero contributed to this article.
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