Investors probably will maintain their exposure to commodities, while they may seek more “active” strategies, according to Hermes BPK Partners LLP, a $2.3 billion advisory and fund of hedge funds manager.
The following are comments from Matteo Dante Perruccio, chief executive officer of Hermes BPK, which is owned by the BT Pension Scheme. He spoke by phone today in London following the company’s introduction of its $275 million Alpha Vault managed futures account, which invests in five Commodity Trading Advisors.
“What we are seeing in some cases is the direct exposure to commodities through ETFs and indexes etc. is being converted into actively-managed alternative approaches,” he said, referring to exchange-traded funds.
“There is clearly some correlation between CTAs and the commodity markets, and the Hermes BPK Alpha Vault solution is a complementary solution not a substitute,” he said. “You will find that investors will maintain their level of exposure to commodities at current levels, but it may be a slightly more diversified approach to getting that exposure.”
“Investors believe that at some point markets are going to break out either in one direction or the other, and CTAs are an effective tool to capture a significant trend.”
On pension funds’ interest in de-risking solutions:
“The real challenge for pension funds is that many experienced a lost decade with their equity allocations. Much of the gains that they have acquired in the run-up to 2008 were wiped out over the period of a couple years, and it’s taking a long time to claw back. They do not want to experience that again, their deficits have increased, and they have to get consistent returns over time, and part of that is protecting themselves from tail risk and reducing their risk.”