Publicly offered commodity funds are limited partnerships that buy and sell futures contracts. There were over 130 such funds in existence in 1988. An examination of their performance over the 1980-88 period indicates that their returns generally improved over the period, but not by enough to make them attractive investments. Furthermore, these funds are risky. Not only does the time pattern of their returns show an extremely high variance, but the probability of a fund dissolving within five years is just under 25 per cent, while the probability of its dissolving within 10 years is almost 50 per cent.

Commodity funds might nevertheless offer attractive investment opportunities if they provided (as some have thought) positively skewed returns, or if it were possible to pick the superior funds. The data indicate, however, that the degree of positive skewness is too small to provide a good reason for investing in these funds. Furthermore, the history of the funds does not seem to offer much, if any, evidence that prediction of superior performance is possible. If commodity funds are to be attractive investments, either their management fees and transaction costs must come down, or new ways of identifying the winners must be developed.