According to ETF Securities’ forthcoming Global Commodity ETP Quarterly report for Q1 2011, diversified broad commodity exchange- traded-products (ETPs) were the most popular choice of commodity ETPs for investors in the first quarter of 2011. Hedging against rising inflation, gaining exposure to strong emerging market growth and diversifying portfolios are some of the key factors driving this demand. Diversified broad commodity ETPs saw global assets rise by $5.2bn in Q1 2011; the largest quarterly inflows on record and representing 51% of AUM growth in commodity ETP assets during the period...
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It is estimated that rising food and energy prices have been responsible for up to half of the total increase in headline inflation rates in the world’s two largest economies: the US and China. With the inventories of most agricultural commodities near historically low levels and weather events hitting supply in key producing countries, agriculture prices have been on a strong uptrend since last year. More recently, political and social upheaval in North Africa and the Middle East has driven oil prices higher. Investors appear to be using commodity ETPs as a way to hedge against further price increases.
Commenting, Nicholas Brooks, Head of Research and Investment Strategy at ETF Securities, said:
“During the first quarter of 2011, diversified broad commodity ETPs accounted for over half of the increase seen in commodity ETP AUM globally. Strong demand for diversified exposure to commodities appears to be being driven by investor demand not just for portfolio diversification, but also for plays on emerging market growth without taking on the political and equity-specific risks that come with investing in emerging markets equities. A number of investors are also using commodity ETPs as a direct way to hedge their portfolios against sharply rising food and energy price inflation.”
Summary of ETF Securities’ All Commodities Funds Vs MSCI World
|ETFX DJ-UBS All Commodities Forward 3 Month Fund (COMF)||2.3%||6.6%||29.0%|
|ETFS Forward All Commodities DJ-UBSCI-F3 (FAIG)||2.2%||6.5%||30.1%|
|ETFS All Commodities DJ-UBSCI (AIGC)||1.9%||4.0%||26.1%|
|MSCI World TR Index||-0.9%||4.2%||12.9%|
*Data to 31st March 2011. Source: Bloomberg
Diversified broad commodity ETPs typically track the futures returns of a range of agriculture, energy, precious metal and industrial metal commodities. Investors seeking a broad exposure to commodities as an asset class are increasingly using commodity ETPs as their primary method of accessing these returns.
ETF Securities’ Global Commodity ETP Quarterly report is a comprehensive global reference for commodity ETP investing. Full data for Q1 2011 will be published on 12th April 2011.
Source: ETFWorld – ETFSecurities