In Japan, it has been passing for about fifteen years since the commodity futures markets have declined. I inquired how the commodity futures should be revived in my interview many times, and at that time, some experts who had known the industry pointed out “If commodity fund had worked well, the industry would have changed”. Commodity fund could be defined as“Investment product in which funds raised from unspecified number of investors are utilized and managed in commodity futures markets mainly by asset management experts”. For the related persons who were involved in the industry from 1990s to 2000s, name of commodity fund has a nostalgic sound. Therefore, I would like to search historically for the reason that commodity fund didn’t succeed.

Commodity fund was born in the U.S. in 1949. The name of the first commodity fund was “Futures Inc.”. In Japan, the Commodity Exchange Act was enacted in the same year and Osaka Chemical Fiber Exchange, the first commodity exchange in Japan after World War II, was registered for establishment on October 17. For the fund of Futures Inc. , about one million dollars speculative money was raised. The reason that so much money was raised was in the founder.
In those days, the founder, Richard Donchian had made great money on his investment centering on commodity futures trading, so voice from requesters “I want you to manage my own money” was endless.
Still, there was no concept of diversified investment and a law relating to commodity fund also didn’t exist. It can be said that Donchian was a CTA, Commodity Trading Advisor, rather than a CPO, Commodity Pool Operator.
Meanwhile, in those days, the scale of the futures markets in the U.S. still have been developing stage, and as institutional investors didn’t show their willingness to take part in the futures markets and the like, the fund disappeared once in 1960 without making any significant progress. However, the setting and the managing method of the fund by Donchian had great effect on the future generations.

Five years later, in 1965, Dunn & Hargitt, CTA formed the first organized commodity fund. It was 2,000 dollars per lot and CTA’s fee was 175 dollars per year. By the way, it was said that the fund refused to open account for a woman and an ethnic minority, and sales didn’t seem to grow.
Furthermore, after that, although commodity fund formed sporadically, it needed a long time to become a major presence as financial product. However, since the middle of 1970s, development of the related legislation for commodity fund began in the U.S.
In 1974, the Commodity Exchange Act, CEA, in the U.S. was amended and the rules relating to CPO and CTA were included in it for the first time. At the same time, Commodity Futures Trading Commission, CFTC, has started. In 1976, CPO and CTA became a registration system, advancing further regulatory development.

In the U.S., since the rules were made clear, forming of commodity fund has been on an increasing trend. However, the time when it has got citizenship as financial product was the middle of 1980s. Furthermore, after the Black Monday on October 19, 1987, it became explosively popular, resulting in a major financial product.
The Black Monday is a day in the financial history when the stocks crashed in New York. On that day, the Dow Jones Industrial Average dropped 508 dollars, 22.6 percent down, showing the biggest drop in the history, and as a result, equity investors suffered great damage, but only commodity fund made a high profit as a whole. At that time, the reason why commodity fund became popular was that commodity price didn’t fall as much as stock price, and even more, in case of commodity futures, another reason was it could take advantage of the characteristics that even sell side could make a profit. So after that, institutional investors also began to utilize commodity fund aggressively.

（to be continued）

（Futures Tribune・issued June 6, 2023・no.3219）