Wall Street’s “unprecedented” participation in commodity markets will spur “extreme” volatility for raw materials, said Mari Kooi, the chief executive officer of Wolf Asset Management International LLC.
“Pay attention to how it’s different this time,” Kooi said at the Bloomberg Link Hedge Fund and Investor Briefing in New York. Supply and demand is “not going to be the ultimate driver of the extreme volatility we’ll see.”
Commodity assets under management rose $19 billion to a record $340 billion in October, led by demand for index-linked investments, Barclays Capital said last week. Raw materials have surged since 2001 as economic expansion in China prompted investors to bet on rising prices for energy, grains and metals. Copper has gained more than fivefold in that time, crude oil quadrupled and corn more than doubled.
The increased “globalization” of commodities combined with the bigger roles of banks and other financial institutions will create a “confluence of events” that “makes this particular time in history unique,” Kooi said.