There are seasonal weather patterns that will ebb and flow during the year bringing volatility to agricultural markets at regular times. However, the longer-term impact on supply can at times be limited. There is noise around production numbers but inventory can serve as a cushion.
Longer-term weather patterns like the El Nina Southern Oscillation (ENSO) can have a much greater impact and cause significant price dislocations. The weather impact may last for a full year or more. La Nina, a cooling pattern in the Pacific Ocean, has returned this winter and it can have a significant impact on agriculture markets if it continues into spring and summer.
After hundreds of discussions with hedge fund managers, I am still surprised that there is a fear of revealing investment processes under the assumption that someone will steal their ideas and intellectual capital. There are few investment styles that are truly unique and special. What is special is still strategy execution – the practical process of delivering returns. Skill is with the decision-making execution of information and strategy.
All hedge funds are not created equal as the return box chart shows for the post Financial Crisis period. There is a significant amount of dispersion across hedge fund styles. Over the period 2009-2018, the difference between the best and worst hedge fund category is almost 7 percent after we account for global equities and bonds.
The attraction to private equity and other less liquid alternatives is clear from the Guide to Alternatives by JP Morgan Asset Management. The return profile is much higher for private equity and debt funds than more liquid alternatives and global bonds; however, the dispersion in returns is multiples higher than what can be expected from other public categories.
