Commodities: Get smart or get washed up

The first wave of easy returns on commodities has passed, while allocations continue to grow. Traditional players are having adapt to a much more liquid market, swimming with a new breed of investors and their active hedging strategies. Peter Koh examines the changes.

ASSETS UNDER MANAGEMENT invested in passive commodity indices have shot up by $75 billion over the past six years to reach an estimated $80 billion. More money is heading in the same direction, but the first wave of easy returns has played itself out. Now investors will have to get smarter to equal or exceed them.

More sophisticated investors are starting to look beyond passive index investing and towards more active styles and more exotic trades.

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