Commodities funds seen overcoming speculation concerns

Exchange-traded commodities funds will continue to prosper despite regulators’ concerns that they may have helped fuel the run-up in oil prices last year.

That’s the view of a panelist speaking at the ETFInsights virtual conference held by InvestmentNews on Wednesday. John Hyland, chief investment officer at United States Commodity Funds LLC, believes providers of such products will look to “optimize” the underlying basket of securities in the funds — primarily futures contracts — to try to eliminate issues such as contango. That’s when the price of a commodity for future delivery exceeds the spot price

Regulatory issues that have plagued such funds will also fade, Mr. Hyland said.

The Commodity Futures Trading Commission has been investigating concerns over excessive speculation in futures markets, and particularly, the run-up in oil prices in 2007 and 2008. Critics charge that exchange-traded products may have helped fuel the price spikes.

But the CFTC and others appear to be coming to the conclusion that exchange-traded commodities offerings were not to blame, Mr. Hyland said.

Panelist Bruce Bond, president and chief executive of Invesco PowerShares Capital Management LLC, believes there will be an an incease next year in the number of exchange-traded funds that focus on the income needs of retiring investors.