Commodity investors should use actively managed hedge funds and not passive indexes according to a new report by UBS Wealth Management. A...

Commodity investors should use actively managed hedge funds and not passive indexes according to a new report by UBS Wealth Management. Active funds can take advantage of market opportunities by timing market entries and exits rather than sitting on long positions as index-based managers must do. They can also avoid negative roll yield, the cost of holding onto a security whose long-dated future price is higher than its cash price. "Investors may want to engage in more active investment strategies in this asset class. In this case, commodity hedge funds may provide a valuable alternative to a passive index-oriented investment in commodities," said UBS in the report. "Given the high cyclicality and the expected changes in commodity markets in the future, investors may want to engage in a more active selection of commodities and not invest passively," it said.