Containing contango

Commodities are back in favour with investors looking for diversification and absolute returns. But market conditions, coupled with the fact that most commodities remain in contango, means passive beta investments could disappoint. How are dealers structuring solutions to this problem? Wietske Blees reports

After suffering dramatic losses in 2008, commodity markets are once again on the up. The benchmark Standard & Poor’s (S&P) GSCI for example, which dropped 68% between June 2008 and February 2009, had recovered 33.72% by December 2009, with assets tracking the index at the end of 2009 estimated to be about $72–74 billion.

A survey conducted by Barclays Capital, published on March 4, 2010, found that during 2009, inflows into direct commodity investments worldwide reached an all-time high of $70