Commodity fund managers face an uphill struggle persuading investors to return to the unloved sector after an abject year in which just two actively managed funds in the 122-strong Lipper Global Commodity group made money.
Although a pick-up in economic growth is expected to boost demand this year, some commodities will remain hobbled by oversupply, making 2014 a crunch year for managers who need to convince investors the asset class can deliver.
"We are still slightly underweight," said Tom Becket, chief investment officer at UK-based Psigma Investment Management, which builds bespoke portfolios for its clients. "We don't have a huge amount of conviction that a turning point is imminent."
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The S&P GSCI, a popular commodity index, fell 1.2 percent in 2013, but the average actively managed fund in the Lipper Global Commodity sector lost 9.98 percent. Lipper is a Thomson Reuters fund research company.
Only two of the 122 Lipper commodity funds generated a positive return—the first-placed Credit Suisse Commodity Access Strategy Fund, which gained 3.34 percent in 2013, and the specialist SafePort Strategic Metals & Energy Fund , which returned a marginal 0.09 percent.
Some of the worst performers were hybrid stocks and futures funds, dragged down by natural resource equities. Gold miners fell 53 percent on average last year.
The best performers tended to be long/short or market-neutral funds, as these were able to make money in falling markets and limit downside risk.
(Read more: Traders cherry pick among sectors as 2014 begins)
Managers had different theories as to why decent commodity performance proved so elusive in 2013.
"Over the last couple of years, if you invested in commodity indices you lost money," said Mikko Heiskanen, portfolio manager at Pohjola Asset Management. His OP Commodity Fund returned 1.3 percent in the fourth quarter, earning fourth place in the Lipper league table.
"The volatility that comes with that is high and it adds a lot of risk to your portfolio, even if it's just a small holding. So an exceptional amount of money has been taken out of the commodity space, which doesn't help," he said.
A steady stream of redemptions took its toll on a commodity hedge fund sector already battling losses, leading to some high-profile closures in 2013, such as Higgs Capital, Arbalet Capital and Clive Capital.
But Nelson Louie, global head of commodities in Credit Suisse's asset management business, thought the reallocation of money into areas such as equities had had less impact on performance in the fourth quarter.