Many of the key figures in the financial industry have made their fortunes in businesses that are related to tangible commodities such as oil, steel, agriculture and precious metals. Some have invested directly in one or more of these while others have made their marks in related industries such as transportation. Each year, Bloomberg creates a list of its 50 Most Influential people, and many of these people are involved in commodities. We look at six influential finance figures and how they can influence the commodity markets [for more commodity news and analysis subscribe to our free newsletter].
Known as the Wizard, Oracle and/or Sage of his hometown of Omaha, Nebraska, Warren Buffett rose from a middle-class background to become one of the world’s wealthiest men. Although he has invested extensively in many industries, his own company, Berkshire Hathaway began as a textile manufacturing firm in the 1950s. He is now one of the richest and most respected businessmen in the world and is also known for his philanthropic nature.
Berkshire Hathaway has made enormous profits from its stake in the Coca-Cola Company and made a failed venture into the oil and gas industry by becoming a part owner of Conoco-Phillips. Buffett has also invested in far eastern firms BYD Company and Petrochina, but while BYD, which manufactures electric cars, netted him a return of over 500% in the first year, he soon sold his shares of the Chinese energy company and thus avoided a huge loss that would have come from the drop in oil prices soon thereafter. He has also invested several billions dollars in forward contracts. Buffett’s commentary has directly impacted the markets on several occasions, and was considered a possible candidate for Secretary of the Treasury by both John McCain and Barack Obama in 2008 [see also The Ten Commandments of Commodity Investing].
Fredriksen was born in Norway and began training at a ship-brokering firm after dropping out of high school. He has since risen to become one of the world’s major shipping and drilling tycoons in the energy industry. His fortune grew substantially in the 1980s when he provided a lifeline of oil shipments for Iran during its war with Iraq. He has invested billions of dollars in both drilling rigs and a fleet of over 70 fuel tankers, and he also has major holdings in other shipping conglomerates. He was the richest man in Norway until he relinquished his citizenship, and his current net worth was recently listed at just over $11 billion by Forbes. He is the Chairman of the Board of Seadrill, Ltd., an offshore drilling company, and he also owns a Norwegian football team. He also has holdings in fish farming.
The Koch Brothers
Fred Koch co-founded Koch Industries in 1940 and provided an advanced method of refining oil. After buying out two of their brothers in 1983, Koch’s sons Charles and David now run the company. Koch Industries is one of the largest privately-held companies in the world and has operations in the manufacture, refinement and transportation of oil and other fuels and chemicals. The company also has holdings in fibers, ranching, paper and pulp, fertilizer, the financial industry and global commodities futures trading. Although the company now employs over 70,000 people worldwide, the brothers have no plans to ever take the company public [see also 25 Things Every Financial Advisor Should Know About Commodities].
Cooperman is listed on the board of directors for Automatic Data Processing (ADP), but his real line of work is serving as Chairman and CEO of Omega Advisors, Inc., a hedge fund based in New York with approximately $2.2 billion of assets under management. The fund invests in stocks of companies that it feels are undervalued, and some of its recent top holdings include energy companies such as Atlas Pipeline Partners, Lynn Energy LLC and Sunoco. It also has fingers in gold and financials with holdings in KKR Financial Holdings and the SPDR Gold Trust (GLD). As of November 2012, just over a quarter of the fund’s holdings are in financial companies and another quarter is invested across the oil and gas sector.
Cliff Asness founded AQR Capital Management in 1998 with three other partners. This hedge fund invests in public equities and fixed income instruments as well as a wide range of derivatives contracts in the options and futures markets. Cliff manages the fund using a quantitative approach coupled with fundamental analysis, and the fund’s holdings consist of both value and momentum plays. The fund invests heavily in the energy sector, and some of AQR’s current top holdings include positions in Exxon, Chevron, Progress Energy, Constellation Energy and Conoco Phillips. It has also recently increased it positions in Patriot Coal and Arch Chemicals [see also 5 Legendary Commodity Investors].
Ray Dalio began his financial career as a stock and commodities trader and futures broker before founding Bridgewater and Associates in 1975. This hedge fund has grown to become the largest in the world with current funds under management approaching $130 billion. Although this hugely successful fund invests primarily in technology companies such as Microsoft and Dell, it also has key holdings in mining and manufacturing companies such as 3M and Caterpillar, as well as energy and finance with positions in Ishares and Metlife and Valero Energy.
This is the son of the first president of Abu Dhabi and he manages the Abu Dhabi Investment Authority, Abu Dhabi’s sovereign wealth fund. Most of its revenue comes from oil production generated by the Abu Dhabi National Oil Company (as well as other oil and gas companies), which is owned by the state. The fund invests in many instruments and asset classes as opposed to just gold and short-term paper, which are used by most governments. The fund has holdings in public and private equities and fixed income instruments, real estate, alternative investments, hedge funds and derivatives. The fund’s assets under management are estimated to be anywhere from $300 billion to $875 billion, although those numbers may have declines sharply due to the substantial losses it has sustained in recent years from the Subprime Meltdown and other factors.
Disclosure: No positions at time of writing.