Investment performance of public commodity pools: 1979‐1990

This study investigates performance of public commodity pools both as a single randomly-selected pool and a market portfolio of pools over the 1979-1989 period. A market portfolio of public commodity pools provides superior investment performance relative to a randomly-selected pool. However, in general, this study provides no evidence that even a market portfolio of commodity pools is an attractive stand-alone investment. Nevertheless, there is some evidence that public commodity pools may improve the risk-return performance of a stock-bond portfolio. This evidence is conditional on the time period analyzed. Furthermore, a portfolio analysis is conducted using the lower brokerage, management, and incentive fees paid by institutional investors in commodity pools. The analysis reveals a substantial increase in the diversification benefits of adding commodity pools to a stock-bond portfolio. This suggests that the costs of public commodity pools form a significant deterrent to wider inclusion in investment portfolios.