Hilary Till and Joseph Eagleeye argue that the differences between the hedge-fund and traditional-investment industries arise from competing views of the key sources of investment returns.

We examine the role of backwardation in the performance of passive long positions in soybeans, corn and wheat futures over the period, 1950 to 2004. We find that over this period, backwardation has been highly predictive of the return of a passive long futures position when measured over long...