INTERNATIONAL. Gresham Investment Management, the New York-based commodities investment company led by Henry Jarecki, has a record US$1.2 billion committed from investors betting that inflation will send raw materials higher.
The US$1.2 billion due in the next several months is “our biggest inflow of new money since we started accepting outside money in 2005,” Douglas Hepworth, the company’s Director of Research, said in an interview in Barcelona late yesterday. “It is basically the inflation story. The economic crisis will end at some point.”
Commodities, measured by the Standard & Poor’s GSCI Index of 24 raw materials, have outperformed stocks and lagged behind US Treasuries this year as copper and gasoline rebounded. Government spending to revive economic growth will either boost both growth and inflation or just inflation, Hepworth said.
“I’m talking about the possibility of hyperinflation or stagflation,” Hepworth, said. “We have some people betting on gold because it’s a stagflation bet.”
It’s a “very reasonable bet” that gold will lead gains in commodities this year, he said. Gold has climbed 6.7%, compared with 20% for copper and 32% for gasoline.
“It’s conceivable there will be more pain in commodities before the crisis ends,” Hepworth said. “But people are looking for very significant inflation afterward and that could take the form of inflationary growth if stimulus plans work or stagflation if stimulus plans don’t.”
The S&P GSCI Total Return index has dropped 17% this year, against a 24% decline in the Standard and Poor’s 500 Index of stocks. US Treasuries have lost 2.5%, according to Merrill Lynch & Co’s US Treasury Master Index.
Gresham now manages US$3 billion in commodities. Commodity assets tracking the Dow Jones AIG commodity indexes dropped 34% in the fourth quarter to US$23 billion, the lowest since September 2005. The assets were US$35 billion at the end of the third quarter and US$15 billion in September 2005.
Jarecki started Gresham in 1992 after establishing bullion trading company Mocatta Metals Corp in 1969 and futures brokerage Brody White & Co in 1971. Mocatta was sold to Standard Chartered in 1986 and Brody White was bought by an affiliate of Societe Generale in 1995.