http://news.morningstar.com/articlenet/ ... ?id=349066
Morningstar notes DFA is "agnostic" on commodities, and simply responding to client demand; however, its somewhat intriguing in light of this recent Prof. Ken French interview:
http://www.americaninvestment.com/inves ... ommodities
DFA to launch a commodity fund
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- Adrian Nenu
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Look at the chart in this Wall Street Journal article from last week.
http://online.wsj.com/article/SB1000142 ... DS=denning
It clearly shows that oil flipped from the more predominant historical situation (backwardation, shown in green) to contango around 2005. It has been in contango predominantly since 2005, and that has served as a drag on the returns of CCF's.
Nobody can prove this, but I suspect the inflow of performance chasers into CCF funds after the great 2002-2005 years is a real factor here. There certainly are other factors in play here (economic situation, oil production, etc) but I suspect an inflow of capital can swing the situation such that the "free lunch" from the roll return - if there ever was one - is gone now.
And DFA is only adding a CCF fund since clients are demanding one. I guess there is no academic support for this asset class.
Best wishes.
http://online.wsj.com/article/SB1000142 ... DS=denning
It clearly shows that oil flipped from the more predominant historical situation (backwardation, shown in green) to contango around 2005. It has been in contango predominantly since 2005, and that has served as a drag on the returns of CCF's.
Nobody can prove this, but I suspect the inflow of performance chasers into CCF funds after the great 2002-2005 years is a real factor here. There certainly are other factors in play here (economic situation, oil production, etc) but I suspect an inflow of capital can swing the situation such that the "free lunch" from the roll return - if there ever was one - is gone now.
And DFA is only adding a CCF fund since clients are demanding one. I guess there is no academic support for this asset class.
Best wishes.
Andy
Totally agree buckingham has used the Pimco commodity fund quite a while so it is a chase for dollars for DFA.stratton wrote:I suspect Larry Swedroe and Buckingham Asset Management has been lobbying DFA on this with maybe some seed funds as incentive. Larry has previously commented about lobbying DFA for tax efficient funds. So...
Paul
- Adrian Nenu
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Really? Aren't DFA advisors supposed to be advising clients on which investments they need, not vice-versa?!And DFA is only adding a CCF fund since clients are demanding one.
Adrian
anenu@tampabay.rr.com
- altruistguy
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Interesting
An interesting development indeed.
I've been lobbying them for over seven years on this issue!
Eric E. Haas
I've been lobbying them for over seven years on this issue!
Eric E. Haas
I've been corrected by Larry offline and Buckingham is not providing any seed money. They've been lobbying lots of people for a less expensive CCF fund and one that doesn't get quite as risky as PIMCO does with some of the collateral investments.Raabe34 wrote:Totally agree buckingham has used the Pimco commodity fund quite a while so it is a chase for dollars for DFA.stratton wrote:I suspect Larry Swedroe and Buckingham Asset Management has been lobbying DFA on this with maybe some seed funds as incentive. Larry has previously commented about lobbying DFA for tax efficient funds. So...
Paul
This fund appears to be using the short term extended credit fund for collateral and DFA isn't being specific about an underlying CCF index.
The preliminary prospectus I found doesn't explicitly say. They only refer to a commodity index except in a case like this:
PaulCommodity-Linked Notes. The Portfolio may gain exposure to the commodities markets through commodity-linked structured notes, swap agreements and commodity futures and options. These instruments have one or more commodity-dependent components. They are derivative instruments because at least part of their value is derived from the value of an underlying commodity index, commodity futures contract, index, or other readily measurable economic variable. The Portfolio may invest, either directly or though investments in the Subsidiary, in commodity-linked structured notes, futures and swap agreements whose performance is linked to individual commodities or commodity indices, such as the Dow Jones-UBS Commodity Index Total Return, the S&P GSCI Commodity Index, or other similar indices, and options on them.
...
Some commodities index options are based on a broad market index, such as the Dow Jones-UBS Commodity Index, or a narrower sub-index covering a single commodity or a themed basket of commodities.
...and then Buffy staked Edward. The end.