Emerging-markets mutual funds managed by Goldman Sachs Group Inc. and Franklin Resources Inc., along with leveraged raw material ETFs, were among the U.S.-registered funds affected the most in this week's commodities selloff.
The $831 million Goldman Sachs BRIC Fund and the $825 million Templeton BRIC Fund, which focus on Brazil, China, India and Russia, both fell 5.7 percent in the week ended yesterday. The funds, from New York-based Goldman Sachs Group Inc. and San Mateo, California's Franklin Resources Inc., lost the most among diversified equity funds with more than $500 million in assets and at least 20 percent in energy or basic materials stocks, according to data compiled by Bloomberg.
Mutual funds and exchange-traded funds dedicated to commodities, including index-based products, suffered steeper declines. The ProShares Ultra Silver ETF, designed to return twice the daily performance of silver, plummeted 51 percent from Monday to Thursday, although it was up 2.85% as of midday on Friday. Non-leveraged silver ETFs fell about 30 percent.
Bill Miller, manager of the $3.94 billion Legg Mason Capital Management Value Trust, said in an April 19 letter to investors that he saw little value in commodities. He pointed to research from Stifel, Nicolaus & Co. showing that commodity returns relative to stock returns were at a 200-year high on a rolling 10-year basis.
“One thing is clear from the analysis of long-term commodity returns: they are cyclical,” Miller wrote.
Commodities plunged yesterday as investors accelerated sales following year-to-date gains through April of more than 23 percent for silver, oil, gasoline and coffee. The Standard & Poor's GSCI index of 24 commodities sank 6.5 percent at 4:32 p.m. New York time in the biggest one-day drop since January 2009, bringing its loss this week to 9.9 percent.
“It's panic,” said Michael Shaoul, chairman of Marketfield Asset Management, which oversees $1 billion in New York. “There's nothing to do with weak U.S. economic data. It's not a global financial crisis. It's a classic liquidation move in a crowded trade.”
Oil tumbled 8.6 percent yesterday, the most in two years, to $99.80 a barrel. Silver dropped 8 percent, extending the worst four-day slump since 1983 to 25 percent.
The Dow Jones BRIC 50 Index declined 5.1 percent from April 28 through yesterday.
The leaders of the four countries plus South Africa, a group known as the BRICS, said last month that excessively volatile commodity prices pose “new risks for the ongoing recovery of the world economy.”
The $726 million DWS Latin America Equity Fund, managed by the funds unit of Frankfurt's Deutsche Bank AG, fell 5.4 percent in the past week. Boston-based
Fidelity Investments' $5.46 billion Canada Fund lost 5.3 percent, and the $1.4 billion FPA Capital Fund, run by Los Angeles-based First Pacific Advisors LLC, dropped 4.6 percent.
Open interest in silver futures has tumbled about 15 percent since the Comex exchange in New York began raising margin requirements on April 25. Futures on Brent crude, crude oil, heating oil, gasoline and natural gas plunged more than 6.9 percent yesterday.
Crude oil dropped below $100 a barrel for the first time since March 17. Copper futures slumped 3.3 percent, falling below $4 a pound for the first time in five months. Among agricultural commodities, cocoa, cotton, corn and weak retreated more than 2.3 percent in futures trading.
