Hedge funds are not to blame for the “super spike” in commodities prices, says Fred Demler of Man Financial. Demler, who mans Man’s base-metals desk, was responding to criticism from both the copper and oil industries that heavy HF involvement in commodities is the cause. Recently John Browne, BP’s top dog, growled that the price increases have “not been driven by the fundamentals of supply and demand. It is the case that the price of oil has gone up while nothing has changed physically.” Rather, notes Vivienne Cox, who manages supply and trading at BP, hedge funds in the past five years have upped their trading in oil tenfold. The International Wrought Copper Council, in a letter to the U.K.’s Financial Services Authority and the London Metal Exchange, seconded the motion, charging speculators have led to spectacular increases in price. Demler insists, “Fundamentals are driving prices,” and while some hedge funds have done well in commodities, 95% of them have no exposure to commodities. HF managers, reports FN, say commodities are now in a “super cycle, and with the size and liquidity of the current market, it would be impossible for one class of investor to have the alleged impact.
