The commodities markets have pulled back in recent weeks as Chinese government entities roll out a swathe of measures aimed at cooling runaway commodity prices, including restrictions on speculative trading practices and releasing government controlled stockpiles. The sell off in many industrial metals and agriculture commodities was accelerated by indications from the US Federal Reserve last week that tapering would begin sooner than markets had expected. The Bloomberg Agriculture Index is down 12% since mid-May, with components like soybeans down 16%, whilst the industrial metals complex is down 9%, with copper falling 12% from recent highs.
Chart 14: Commodities fall on China and Fed talk
Hedge fund short bets continue to hurt many of the industry’s biggest managers. An index tracking the performance of the 50 most shorted names in the broader Russell 3000 Index has outperformed the S&P 500 by some margin on a rolling 6 monthly basis. With ample liquidity flooding into equity markets and a continued surge in retail trading, market valuations on many stocks have been stretched to record levels, hurting those hedge funds with particular focus on short bets against stocks with prices disconnected from fundamentals.
Chart 15: Hedge Fund short pain
Whilst most private markets asset classes saw a slow down in total assets raised for full year 2020, venture capital (VC) was the one area that continued to see year on year growth with $121 billion in new capital raised. 2021 has gotten off to a similarly strong start with $45.6 billion raised in just the first quarter. With record amounts of capital to deploy, investors have continued the recent trend of allocation higher amounts to experienced managers with longer track records in the VC space. 71% of capital raised in Q1 ’21 was allocated to tenured VC managers vs just 43% in 2017.
Chart 16: Venture Capital focus on experience managers