Wikinvest Wire

China just loves oil and gold

Tuesday, February 09, 2010

Bloomberg reports that the giant Chinese sovereign wealth fund is now the number four holder of the United States Oil Fund (NYSE:USO), the world's largest crude oil fund, and a major holder of the SPDR Gold Shares ETF (NYSE:GLD), the world's largest gold fund.

China Investment Corp., the nation’s sovereign wealth fund, invested for the first time in the U.S. Oil Fund, an exchange-traded crude-futures fund, joining Morgan Stanley & Co. and Goldman Sachs Group among the top holders.

China Investment became the fourth-largest holder in the Oil Fund by buying 2 million shares, equal to 3.48 percent of the outstanding units, with a value of $78.6 million, according to a Securities and Exchange Commission 13-F filing posted on Feb. 5. It also took a 1.45 million share stake, or 0.4 percent of the total, in the SPDR Gold Trust worth $155.6 million.
Institutional investor Paulson & Co. holds the largest number of shares in the SPDR Gold Trust with 8.68 percent, or 31.5 million. Goldman Sachs has the biggest stake in the U.S. Oil Fund with 5.3 percent, or 3.045 million units.
Surely the folks at Goldman Sachs know of the poor buy-and-hold performance of USO and are just using it as a super-liquid trading vehicle where they can take advantage other less skillful traders, but you'd think that the Chinese would have made their purchases with a longer time horizon than a few hours or a few days.

As discussed here a few weeks back, during 2009 as the price of crude oil rose almost 80 percent, USO gained only 19 percent. In fact, since its inception back in April 2006, the fund is down almost 50 percent, whereas, the price of crude oil has gained a few percent. So far this year, things seem to have improved a bit since, as of yesterday's close, the oil price was down 10 percent while USO shares had fallen 8 percent.

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