New Public Offerings, Information, and Investor Rationality: The Case of Publicly Offered Commodity Funds

Publicly-traded commodity funds have been poor investment vehicles, yet new funds are a fast-growing part of the investment scene. In this article, the authors show that the information provided to investors is significantly biased upward and that true performance cannot be determined by the information most investors see. Thus, investment in commodity funds, given the information set, is rational. While the authors limit the study to commodity funds, the same should hold for other limited partnerships, such as real estate, oil, and gas. Copyright 1989 by the University of Chicago.