March 7, 2011
post contributed by Megan Flynn
Those in attendance for February’s roundtable were given an opportunity to experience an inspiring presentation of intellect regarding the very origins of our financial community - Commodities.
Scott Hobart (Portfolio Manager at HFZ Limited), Renee Haugerud (CIO & Managing Principal of Galtere Ltd.), and Dan Ward (Investments Manager of the Virginia Tech Foundation) guided the packed house through current developments in the commodity market.
Of the many topics discussed that evening, emerging markets in particular entertained especially thoughtful discussion. In Hobart’s opinion, China’s Commodity market is mispricing, but the middle space is still a good indicator of macro trends. Ward brought up new policies in Brazil that have scared off foreign investors - even though most of the land there is unharvested. Ward continued to explain the importance of personal relationships in these markets saying, “Politics still matter…Who you’re connected to makes a huge difference” he said referring to Brazil in particular.
Ward is not inclined to hold physical commodities in his portfolio; he prefers to make indirect commodity investments like farmland. However, he still would never passively own commodities, like ETFs. The capability of commodity ETFs was brought up a few times by the panelists and again revisited with a question from the audience. Hobart acknowledged the ETF issue is “hotly debated” yet all three panelists remained skeptical. “We’ve already seen redemptions of up to 50% out of those products – and they’re new” Hobart stated.
Haugerud spoke in a quick and precise prose as she explained that every portfolio should be exposed to real assets. “What prudent investor wouldn’t put money into real assets?” she stated. When investing, Haugerud prefers to first look through the commodities lens and then assess the effect commodities will have on the rest of the asset classes. According to Haugerud, the factors that go into valuing commodities such as supply and demand are simpler than the countless factors that go into valuating equities.
Even though the fungibility of commodities makes basic staples like grain seem like simple investments, the panel displayed the potential for extreme intricacy in the commodities market which is all contingent on the investor's willingness and capacity for intellectual depth and dedication. The discussion gave the Roundtable a unique view into the true breadth of the global financial world, which was a refreshing change in focus from the common narrow introspection of the fiscal issues here in the United States.
The expertise that was presented on Thursday was inspiring, the passion was contagious, and the buzz created in the room was at times uncontainable. The demonstration of what this panel deeply understood about the basic and vital assets of the world economy was invaluable for all in attendance.