$Stock*Shop*Charts*News*Option$

[Stock Lobster]

>>Big US pension fund moves into commodities

By Jack Farchy in London

Published: June 4 2010 11:13 | Last updated: June 4 2010 22:16

The second-largest public pension fund in America has approved its first investment in commodities in a sign of the growing trend for institutional investors to move into raw materials as a diversification strategy and an inflation hedge

The California State Teachers’ Retirement System said “the Calstrs investment committee voted to move ahead with an allocation to commodities”, adding that a plan for the investment would be developed and presented to the board later in the year.

The decision comes as US federal commodities regulators explore whether to impose limits on institutional investors’ exposure to raw materials markets.

Critics, including several senior lawmakers in Washington, worry that big investors helped inflate commodity prices in 2008 when oil, wheat, cotton and other markets surged.

Calstrs, which holds $138.5bn in assets, follows its neighbour, the $198.7bn California Public Employees’ Retirement System, or Calpers, into the commodities asset class.

The huge Dutch pension funds PGGM and ABP pioneered investing in commodities in 2003.

Other European funds, such as the UK’s BT pension scheme and France’s state-owned Fonds de Réserve pour les Retraites, as well as US-based schemes, including the Teacher Retirement System of Texas and the Teachers Retirement System of the State of Illinois, have also diversified into commodities since 2005.

The allocations are relatively small, however, with most pension funds investing just 1-2 per cent of their assets in commodities.

Calstrs staff said in a report that “commodities can serve a strategic role in Calstrs’ Absolute Return allocation as one potential hedge against inflation or negative shocks impacting other investment markets”.

Elsewhere in commodities markets, cocoa was the star performer, with the spot cocoa contract in London rising above the £2,600-a-tonne level for the first time in nearly 33 years.

Liffe July cocoa rose to an intraday high of £2,606, up 7.7 per cent on the week.


.Copyright The Financial Times Limited 2010. You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the web.
http://www.ft.com/cms/s/0/0a034cec-6fb9-11df-8fcf-00144feabdc0.html