The Growing Financialisation of Commodity Markets: Divergences between Index Investors and Money Managers

Abstract

Commodities are key for developing countries' economic integration. This article distinguishes two types of financial investors in commodities and emphasises differences in position taking motivation and price impacts. Index trader positions are positively correlated with roll returns, while money managers emphasise spot returns. During 2006–2009, index trader positions had a price impact for some agricultural commodities, as well as oil. During 2007–2008, money managers impacted prices for non-agricultural commodities, especially copper and oil. The financialisation of commodity markets may make it more difficult for developing countries to manage their resource sectors for sustained economic development.