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Three former executives from Goldman Sachs’s powerful commodities division plan to launch their own fund, promising to use trading strategies deployed at the bank in the hope of enriching their own investors.
Quantix Commodities was incorporated last month, according to Delaware state records. The fund manager will be led by Don Casturo, Tom Glanfield and Daniel Cepeda, each a former member of Goldman’s J Aron commodities division.
“We are reassembling what I consider to be the premier commodity index team from the Street and putting it together in a fund format,” Mr Casturo told the Financial Times.
Mr Casturo said Quantix would manage a “long-only” fund, which makes money when prices rise. Unlike products that passively track commodities indices, he said the group would follow indices but also actively manage futures positions to try to capture fleeting opportunities for profit.
They will have plenty of competition. Groups such as CoreCommodity Management and Pimco have offered commodities funds for years. More than a dozen exchange-traded products hold broad commodity futures portfolios, while Goldman Sachs and other Wall Street banks deal swaps that track commodities indices, allowing institutional investors exposure to prices.
Net investor flows into commodities have been about $25bn in 2018, bringing total assets under management to $344bn, according to RBC Capital Markets.
The rise of commodities investing led to charges that it was distorting prices for oil and food. In 2009 Mr Casturo was among the Wall Street executives called to testify before the US Commodity Futures Trading Commission as it weighed new limits on speculative positions in commodities. The resulting limits were rejected by a court and have not been reissued.
Before resigning from Goldman this year, Mr Casturo held roles included running the bank’s commodity investor products desk from 2007 to 2013. Mr Glanfield’s jobs including serving as head trader for the commodity index swaps book, while Mr Cepeda traded base metals and commodity index volatility, Mr Casturo said.
Swap contracts are constructed using rules that make them fairly rigid portfolios for investors. Goldman’s commodities division was able to flexibly hedge its own swap positions in a way that could boost profits for the bank, Mr Casturo said.
He added that at Quantix, based in Greenwich, Connecticut, “we’re going to do the same thing but we’re going to do it to the benefit of our investor base”.
After flying high in the last decade, commodities markets have had a poor run. The S&P GSCI total return index, formerly the Goldman Sachs Commodity Index, has declined 40 per cent since 2010.
“I know the story about how challenging long-only commodity investing has been,” Mr Casturo said. But he argued commodities were poised to regain ground as supplies of natural resources tighten late in the business cycle. “Historically, that’s when commodities have outperformed,” he said.
Goldman’s commodities division stumbled badly last year “amid inventory challenges and muted client activity”, the bank’s chief financial officer Martin Chavez said in January. Several senior executives, including head of commodities trading Greg Agran, left the bank. The unit’s results have improved in 2018.