Asia's fund industry is light on money managers who have experience trading commodities and risks missing out on the billions of dollars flowing into the red-hot asset class.
Analysts said Asian investors looking for active managers of commodity funds are likely to send their money outside the region due to lack of local talent, or otherwise play the sector passively through index-linked instruments.
"There's a relatively small pool of people with in-depth commodity trading experience, and there's an even smaller number of people who have had any exposure to managing third-party money," said Michael Coleman, managing director of Singapore-based hedge fund manager, Aisling Analytics, which specialises in commodities.
Fuelled by inflation fears and a surge in demand from the emerging economies of China and India, commodities are fast becoming a mainstream asset class.
Bankers say money managers have directly invested some $70 billion to $200 billion into the sector in recent years, up from less than $10 billion five years ago. Much of that cash has gone into passive funds tracking the Goldman Sachs Dow Jones AIG, Deutsche Bank Rogers International and Reuters/Jefferies CRB indexes. But with indexes rising to lofty levels, and some commodities such as gold and silver experiencing sharp one-day pullbacks, investors may be thinking twice about just buying an index in expectation of a broad and endless rise.
Commodity trading advisers, who have traditionally traded futures and options on behalf of wealthy individuals and institutional investors, are rare in Asia outside of Japan.
"If you're talking about CTAs, commodity trading advisers, which is active management, then the US is where most of them are based," said Puru Saxena, a Hong Kong-based investment adviser who has invested a large portion of client money in commodities using indexes.
Analysts said the CTAs and hedge fund managers who actively trade commodities are largely US or Europe-based because of their proximity to major exchanges. By contrast, much of Asia's trading expertise is locked away in major commodity houses like Noble Group.
ASIAN TALENT DEVELOPING:
Aisling's Coleman, whose firm had $67 million in assets at the end of March, said the search by institutional investors for active commodity managers was a relatively new phenomenon.
While the influx of cash should help the fund management industry attract Asian commodity trading talent from the proprietary trading desks of big investment banks, he said this was a limited route.
"The problem is whereas there are thousands of people working on the prop desks of investment banks in equities and bonds, you're talking about a very small fraction of the people doing that in commodities," Coleman said.
The other potential source of trading talent, major commodity houses, were already paying their best traders "like a hedge fund", giving them little incentive to move, he said.
Hedge funds typically charge clients a 20 percent performance fee on top of a 1 to 2 percent management fee. Top managers often receive a large chunk of this fee in their pay to discourage them from going off to set up their own fund.