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Commodities Prices Down in June

Low energy prices have contributed to a lack of pickup in inflation, while concerns about Chinese growth have abated, Credit Suisse reports.

By Poonkulali Thangavelu

Commodities saw a drop-off in performance for June, Credit Suisse Asset Management reports, with the Bloomberg Commodity Index turning in a negative total return for the month. Of the 22 index components, 12 reported losses.

Credit Suisse noted the following about the performance of various index groups:

  • Energy was down 3.74%, with rising production out of Nigeria and Libya hitting crude oil and petroleum products.
  • Precious metals was off 3.12%, on expectations that the Fed would move more strongly to reduce its balance sheet.
  • Livestock dipped 1.88%, on the influence of live cattle, as the USDA noted that production of beef was above its five-year average.
  • Agriculture rose 3.08%, on concerns about the upcoming US spring wheat crop that faces dry and hot weather in the Northern Plains.
  • Industrial metals gained 3.37%, as markets became hopeful that China’s tightening of credit would not impact economic stability.

Christopher Burton, senior portfolio manager, Credit Suisse total commodity return strategy, noted, “the demand for Precious Metals continues to be influenced by the strength of the US Dollar and safe haven demand. The trend of higher interest rates may hurt precious metals demand, unless offset by greater inflation, while safe haven demand is likely to remain intact.”

Credit Suisse also notes that inflation has been contained as a result of low energy prices. Markets are watching to see if increased production in Nigeria and Libya will be sustainable, and also wonderiif other OPEC members will take action to curtail the impact of the rising supply.

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Industrial metals continue to feel the impact of labor disputes, and restrictions on the production of certain metals on environmental concerns. Also, with the livestock market’s view of the US as a safe supplier, the country could gain a higher share of the beef market, as Brazil faces a meat scandal and inquiry into corruption.

Nelson Louie, global head of commodities, Credit Suisse Asset Management, said, “Recoveries of major economies seem to be moving in the same direction. Reported manufacturing activity in the US and Europe remained in expansion territory, while China returned to a slight expansion in June, which may be supportive of base metals demand.”

He added that consumer confidence levels in the US and parts of the Eurozone have risen, and that central banks continue to be accommodating in the face of these positive economic indicators. Besides, concerns about the pace of Chinese growth have abated following the Chinese central bank’s indication that it would continue to support economic growth, even as it clamps down on credit availability.

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Home > News > Asset Allocation > Carlyle Group Targets $15 Billion US Buyout Fund as Private Equity Booms
Asset Allocation

Carlyle Group Targets $15 Billion US Buyout Fund as Private Equity Booms

Fund would be the largest ever to focus on the region and comes as rivals raise megafunds.

By Vishesh Kumar

The Carlyle Group is targeting a $15 billion raise for its next US fund, according to Bloomberg. The fund would be the seventh the firm has raised for the US. It comes as private equity funds are on pace to raise record amounts of funding, even as dry powder—the amount of uninvested capital available—hits record levels.

 

Carlyle’s plans come in the wake of rivals raising large funds of their own. In March, KKR closed a $13.9 billion buyout fund to focus on North America, the largest pool to be raised for the region. In April, Silver Lake raised $15 billion for a global technology buyout, the largest fund of its type. Apollo Global Management, meanwhile, is targeting $23.5 billion for its next global fund in what would be the biggest buyout fund ever raised by a private equity firm, according to Bloomberg.

 

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Investors have closed five buyout funds with at least $10 billion this year, raising a total of $67.9 billion for the funds, according to research firm Pitchbook. If Apollo and Carlyle were to meet their targets, the seven funds would have $106.4 billion and top the prior record set by large buyout funds in 2007, according to Pitchbook.

 

A strong performance record is likely drawing investor interest to the new Carlyle fund. Carlyle’s four latest flagship buyout funds have Internal Rates of Return (IRRs) of 8%, 14%, 13%, and 21%, according to Pitchbook.

 

Investors have been piling into private equity—especially large, established funds—based on strong historical performances.

 

“I’ve been doing this for 30 years, and one of my principal jobs at Carlyle has been to help raise the money, and I’ve never seen as good a time as it is now to raise money,” Carlyle co-Chief Executive Officer David Rubenstein said in May at a conference in New York, according to Bloomberg. “I suspect that all the major funds that are being raised by the large private equity firms will be oversubscribed. I suspect that’ll be the case with us.”

 

The fees charged by private equity funds have increased in 2017 as the investor interest gives managers increased negotiating leverage. The competition for deals is mounting, however, with record amounts of capital to be invested.

 

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