Oil bubble could prove threat to pension funds

[ben_meyers]

Once again deregulated financial markets are coming back to bite everyone. As the article says, these funds don't belong here and most have no idea what they are doing.

By Matthew Robinson - Analysis

NEW YORK (Reuters) - Pension funds and other investors who rushed into oil through commodity indexes this year chasing big returns as other asset classes tanked could face steep losses if prices fall from record highs.

An avalanche of cash has rolled into commodities through simple long-only indexes this year, feeding the record-setting oil rally some experts say could be a bubble that is becoming more vulnerable to shifts in supply and demand fundamentals.

A sell-off in oil could spell big losses for the pension funds, municipal funds, college funds, unions and other groups that jumped out of equities-market plays and into the indexes, but have little experience or flexibility to deal with fundamental changes in commodities.

"A lot of the accounts that that have moved into commodities over the last 8-12 months clearly don't belong in this forum," said Peter Beutel, president of Cameron Hanover.

http://www.reuters.com/article/newsOne/idUSN3036922920080530