ETC: Industrial Metals Top Performing Commodity in 3Q09 and YTD, While Commodities Remain Top Performing Asset Class Over 10 Years . ….
- ETFS Nickel up 55% in 3Q09 making it the best performing ETC, followed by energy ETCs including ETFS Crude Oil (up 26.3%)
- ETFS Forward All Commodities DJ-UBSCI-F3SM up 12% during 3Q09
- The buy/sell ratio was highest for ETCs tracking agriculture and precious metals during the quarter
- Strongest flows into gold and natural gas ETCs over Q3 with gold continuing to reach record highs. Industrial metals and agriculture inflows maintained momentum from 1H09
- ETFS All Commodities was 4th most popular ETC as investors continue to diversify into commodities, the top performing asset class over the past 10 years
Commodities built on strong growth from the first half of the year with the ETFS Forward All Commodities DJ-UBSCI-F3SM up 12% during 3Q09 and 238% over the past 10 years. ETFS Industrial Metals was the best performing ETC, with YTD growth of 54% and 22% during 3Q09. Industrial metals have also significantly outperformed developed market equities, bonds, cash and real estate since the start of 2009 as market appetite for high beta assets has accelerated.
Commodities remain the best performing asset class over a 10 year horizon, with ETFS Forward All Commodities DJ-UBSCI-F3SM registering cumulative growth of 238%, compared to a 12% decline in the Dow Jones Euro STOXX 50, a 19% rise in the FTSE 100, a 2% rise in property1 and a 79% return on bonds2. This outperformance was achieved with lower average annual volatility3 that these equities over the same period. Energy was the next best performing sector with ETFS Crude Oil, ETFS Gasoline and ETFS Petroleum returning over 25% each during 3Q09.
Asset Class Returns Compared (Q3 09, YTD, and Past 10 Years)
|ETFS Industrial Metals|
|ETFS Forward All Commodities DJ-UBSCI-F3SM|
|Dow Jones Euro STOXX 50|
|US Tracker 1-10 Yrs Bond Index|
|UK EPRA Real Estate Index|
2 Bonds: Proxied by US Tracker 1-10Yrs Bond Index
3 Calculated using the annual volatility of daily returns from 30th September 1999 to 30th September 2009
Investor flows continued to grow apace during the third quarter, with AUM in ETF Securities’ ETCs rising $3 billion to $15 billion. Physical gold and long natural gas ETCs saw the largest investor demand in 3Q09, with inflows of $713 million and $642 million respectively. By 30 September 2009 net cumulative flows into all ETCs was 67% higher than the previous peak set in August 2008, highlighting the strength of investor interest in commodities.
In terms of investor positioning, agriculture ETCs including ETFS Agriculture had the highest buy/sell ratio of any commodity sector with buys out numbering sells 2.3 to 1, closely followed by precious metals ETCs at 2.2 to 1. These two sectors have seen the most consistent trend in cumulative inflows since the start of 2009, reflecting long term strategic positioning.
Industrial metals were the strongest performing sector over the past quarter, with ETFS Industrial Metals up 22%. Gains were led by a 55% rise in ETFS Nickel, and a 22% rise in ETFS Copper. ETFS Aluminium remained the weakest of the industrial metals as in 1H09, but still managed a 15% return over the quarter. Inflows into industrial metals continued into H2, with net cumulative flows into industrial metal ETCs now 53% above the previous high in March of 2008.
Top 10 Long and Short ETC Performance 3Q 2009
|Top Ten Longs||Q309|
|ETFS Petroleum DJ-UBSCISM||27.2%|
|ETFS Crude Oil||26.3%|
|ETFS Heating Oil||24.0%|
|ETFS Industrial Metals DJ-UBSCISM||22.5%|
|ETFS Energy DJ-UBSCISM||17.4%|
|Top Ten Shorts||Q309|
|ETFS Short Natural Gas||55.5%|
|ETFS Short Energy DJ-UBSCISM||14.1%|
|ETFS Short Wheat||12.9%|
|ETFS Short Live Cattle||9.0%|
|ETFS Short Livestock DJ-UBSCISM||8.5%|
|ETFS Short Aluminium||8.2%|
|ETFS Short Lean Hogs||6.7%|
|ETFS Short Grains DJ-UBSCISM||5.1%|
|ETFS Short All Commodities DJ-UBSCISM||3.4%|
|ETFS Short Cotton||3.2%|
Within precious metals, the best performing commodities were metals tied to the industrial cycle, with ETFS Physical Palladium up 16% and ETFS Physical Silver up 6%. With risk appetite remaining high through the third quarter, gold prices were flat over the quarter despite more recently reaching an all time high just after quarter end. Nonetheless interest in holding physical gold remained stronger than ever, with almost $750m flowing into ETF Securities’ physically-backed gold ETCs as investors continued to build positions to hedge against potential future inflation, currency debasement and counterparty risk. Gold spot prices increased rapidly just after the quarter came to a close, hitting new historic highs over $1050/oz. Total assets in ETF Securities’ physically backed gold ETCs stood at $8.5 billion by the end of Q3 2009, making them the largest ETF/ETC holdings in Europe and the second largest ETC/ETF holding in the world.
The energy sector saw another mixed quarter of performance with a 32% rise in ETFS Gasoline, a 27% rise in ETFS Petroleum and a 26% rise in ETFS Crude Oil offset by an 11% fall in ETFS Natural Gas. Despite subdued returns recently, inflows continued apace into natural gas ETCs, with a combined $642 million of inflows into ETFS Natural Gas and ETFS Leveraged Natural Gas over 3Q09. This takes YTD natural gas inflows to an unprecedented $1.2 billion, making long natural gas ETCs the most popular ETFS product in 2009 behind physically backed gold. The second half of the third quarter also saw a revival of flows into long oil ETCs after outflows were experienced due to profit taking in the second quarter, suggesting a broadening in investor interest across the energy commodity complex by the end of Q3 2009.
Agriculture saw a sharp contrast in returns with ETFS Softs up 14% vs. a 1% gain in ETFS Grains. ETFS Softs (tracking the futures returns of sugar, coffee and cotton) were pushed higher by ETFS Sugar, up 26% during 3Q09 and building on the 32% rise in 1H09. Further strength in ETFS Soybeans in the third quarter (up 20%) was offset by continued weakness in ETFS Wheat (-5%) and ETFS Corn (-16%). Historically low inventories for some agricultural commodities, and lingering concerns surrounding the impact of an emerging El Niòo weather pattern on crop production at the end of 2009, helped see further steady inflows (+$285 million) into agriculture ETCs over Q3. ETFS Agriculture (which provides exposure to a basket of agricultural commodities) experienced the third highest inflows into an ETC YTD (+$552 million), behind ETFS Physical Gold and ETFS Natural Gas.
Nicholas Brooks, Head of Research and Investment Strategy, commenting on the 3Q 2009 performance numbers said:
“Investors’ continued to aggressively build positions in ETCs in the third quarter as concerns about the US dollar and potential future inflation drove strong demand for safe haven “hard assets” and continued strength of cyclical indicators kept interest in economically sensitive commodities high. ETF Securities’ Physically backed gold ETCs, particularly ETFS Physical Gold and Gold Bullion Securities, saw especially strong demand, with assets under management soaring by $1.3bn during the quarter, bringing ETF Securities total gold holdings to $8.5bn, a 61% increase above end 2008 levels. ETFS Natural Gas came in a close second, with AUM rising $793mn during the quarter, up 163% over 2Q levels.”
“Commodity returns during the quarter were strong, continuing the trend that started in 1Q 2009, with ETFS Nickel surging by 55%, ETFS Gasoline by 32% and ETFS Crude Oil and ETFS Sugar both up by 26%. Commodities remain the best performing asset class over a 10 year horizon, with ETFS Forward All Commodities DJ-UBSCI-F3SM showing cumulative growth of 238%, compared to a 12% decline in the Dow Jones Euro STOXX 50 and a 79% rise in bonds (as measured by the US Tracker 1-10 Yrs Bond Index).”
Source:ETFWorld – ETFSecurities