CFA论坛 - Powered by Discuz! Board

RSM is an established Canadian biotech firm with a significant equity exposure in its investment portfolio. The firm’s CFO, Eileen Jurczak is looking to diversify RSM’s investments by adding other asset classes to the portfolio mix but is unsure which assets to include. She consults Mike Thompson, CFA, the investment portfolio’s portfolio manager, who recommends adding commodity futures. Jurczak is somewhat familiar with commodity futures as a hedging tool but is unsure why they would be considered an asset class. Thompson responds by making the following statements:

Statement 1: The commodities underlying a commodity futures contract are considered assets even though they cannot generate cash flows.

Statement 2: Commodity futures, on the other hand, have the potential to generate cash flows, both negative and positive. This is the main reason why they are considered an asset class.

With respect to the above statements, Thompson is:

A)	correct on both statements.

B)	correct on only one statement.

C)	incorrect on both statements.

Thompson is correct on Statement 1 but incorrect on Statement 2. Although commodities do not generate cash flows, they are assets since they are valuable as a store of value and as inputs in a production process. Commodity futures, however, are generally considered an asset class only if they can generate positive cash flow (positive roll yield or return).

Which of the following pairs correctly describes why commodities and commodity futures would each most likely be considered an asset class, respectively:

Commodities

Commodity futures

Store of value

Potential for positive
cash flow

Store of value

Production input

Store of value

Commodities are assets because they are valuable either as a store of value (e.g. gold and platinum) or as a production input (e.g. cotton for clothing). Commodities, however, do not generate cash flow.

Commodity futures may be considered an asset class when they offer an investor positive return (generally defined as return in excess of the risk-free rate). Commodity futures are not a store of value since they have a specific and a relatively short-term expiration.

Which of the following statements would most strengthen the argument that commodity futures are not an asset class:

Statement 1: Hedy Gaal establishes a short position in cocoa bean futures for her managed futures fund in a contango market. She expects no change in the spot price of cocoa by contract expiration.

Statement 2: Jeff Anka buys ten 60-day wheat futures in a backwardated market. A month after his purchase, the price of wheat drops dramatically and he sells his position at a significant loss.

Statement 3: The German hedge fund Neulander recently established a speculative long position in sugar futures in a contango market. Through careful active management the fund is able to achieve a positive roll yield when it closes its position.

Statement 1 strengthens the argument that commodity futures are an asset class. This is because a short position in futures in a contango market, when assuming no change in the spot price, would result in a positive roll yield and hence positive cash flow to Gaal’s fund (think of this as selling high and buying low).

By contrast, even though Anka bought the wheat futures in a backwardated market with the expectation of achieving a positive roll yield, futures prices must converge to the spot price closer to maturity. The loss on the futures position translates to a negative roll yield, favoring the argument that commodity futures are not an asset class.

In Statement 3, Neulander is able to achieve positive returns through active management regardless of market conditions. Since the positive return means the futures are valuable, this favors the argument that commodity futures are an asset class.

Which of the following statements concerning the similarities and differences between commodities and capital assets is FALSE?

A)	Both capital assets and commodities can be valued based on the present value of their future cash flows.

B)	International diversification is meaningful for capital assets, but not for commodities.

C)	Capital assets can be separated into systematic and unsystematic risk components, but commodities cannot.

Commodities do not provide a claim on a stream of cash flows the same way that stocks and bonds do. As a result, commodities are valued based on supply and demand forces and not the present value of future cash flows. Note that while some alternative assets such as hedge funds simply provide a new means to invest in existing asset classes, commodities are an alternative investment that qualifies as a distinct asset class.