The letter that the Amaranth hedge fund sent to its investors this week served as a message to the whole market. It said its funds had “experienced significant losses in their energy-related investments following a dramatic move in natural gas prices” and that it was “aggressively reducing our natural gas exposure”.

This raises questions about Amaranth. But it also provides a reminder of the risks in commodities trading, which has found its way into the investing mainstream, although appearing to be inadequately understood. This year saw the launch of several exchange-traded funds allowing the individual investor to play commodities, and a range of academic work suggesting commodities should now be part of institutional managers’ asset allocation.