This paper examines the performance of managed commodity funds during the period 1982 through 1996. By year-end 1996 almost $30 billion of speculative capital was invested in these funds, a nearly 60-fold increase since 1980. Three types of managed commodity funds are available. First, investors can purchase the shares of public commodity (or futures) funds, which is similar to buying shares in a stock or bond mutual fund except that mutual funds buy and sell securities rather than commodity futures. Public funds are accessible to small (retail) investors because they typically have the lowest minimum-investment requirements. Second, investors can place funds with a commodity pool operator (CPO), who pools all investors' funds together and employs one or more commodity trading advisors (CTAs) to manage the pooled funds. Pools have higher minimum-investment requirements than public funds. Third, investors can directly retain a CTA to manage their funds on an individual basis. This avenue is open only to investors with substantial net worth and to institutional investors, since CTAs typically set high minimum-investment requirements.
