When we went out to Vegas for the SALT conference earlier this year, we heard a lot of disdain out of large pension planners when it came to managed futures. We were annoyed then, but we’re sort of chuckling now. News is out today that CalPERS, with an allocation to commodities that has ballooned since October 2007 to $3.6 billion, has experienced a negative rate of return to the tune of -6.9% from their bet. Well, if reports are to be believed, now we know why (emphasis ours):

Detailed data for performance in May and June 2012 is not yet available. By design, however, performance closely tracks the S&P Goldman Sachs Commodity Index Total Return Index, which declined 12 percent over those two months, so it is almost inevitable the program was down sharply by the end of the second quarter — ensuring it has been loss-making since inception.

We understand that these investment professionals are very experienced and very smart. But we did try to warn you all that long-only exposure to commodities is not necessarily the best way to play this. To be fair, and as the article explains, CalPERs is definitely far more of a long-term investor than your Average Joe on the street, and are betting on commodity prices going up in the long-term. We’re not sure we’d take the other side of that bet. But those managed futures programs institutional investors seem to have such disdain for? Using the Newedge index as an imperfect proxy for the asset class, an allocation to managed futures in October of 2007 would have delivered a return of 16.7% through June of this year. Past performance is not necessarily indicative of future results, but are we allowed to say we told you so now? In our minds, it makes a lot more sense to seek commodity exposure that at least has the opportunity to profit whether prices go up or down.

Dear CalPERS- if you’re looking for a better way to access commodities, we know a guy.