Gold best performing commodity in 2008, while commodity returns continue to outperform over 5 and 10 years …
- old was the star performer in 2008 with a 44% return in GBP terms, outperforming equities
- Commodities remain best performing asset class over five and ten years
- Strong increase in net inflows into ETFS physically-backed gold products in 2008
- Oil inflows continue as long oil ETCs reach new records
- Short ETCs best performers in 2008 with ETFS Short Gasoline (SGAS) the best performing ETC returning 94%
ETF Securities recently published it’s annual review of the past year’s commodity markets. The review, titled “Commodities review 2008” shows that commodities continue to outperform other asset classes. Gold was one of the best performing assets during 2008 while commodities generally have outperformed over five and ten years.
While falling substantially in 2H08 due to broad market falls and deleveraging, broad commodity indices still managed to outperform equities in 2008. DJ-AIG Commodity Index 3 Month ForwardSM fell 30% in 2008 compared to a 42% fall in the MSCI AC World Index. Although many assets fell in unison last year during the peak of the credit crisis, what really stands out is commodities’ outperformance over longer periods. The DJ-AIG Commodity Index 3 Month ForwardSM returned 70% and 272% over five and ten years compared to 0% and -2% for the MSCI AC World Index over the same periods.
ETFS Physical Gold (PHAU) was the best performing ETC in 2008, up 4% in USD terms while most other asset classes suffered significant falls. The gold spot price rose 44% in GBP terms and 11% in EUR terms during the year. By comparison, gold outperformed equities (as measured by the MSCI AC World Index) by more than 46% in USD terms in 2008. This outperformance was driven by gold’s low to negative correlation with equities, the fact it is not subject to credit risk and also its status as a safe haven asset.
As a result, there was continued net inflows into ETFS Physical Gold (PHAU) and Gold Bullion Securities (GBS) during 2008. Physically backed gold ETCs now total $4.8 billion in assets under management (AUM), while also recording the highest trading volumes of any ETC.
In 2008, energy and oil prices attracted a great deal of attention. At the time oil prices peaked at around $147 per barrel, ETFS Short Crude Oil (SOIL) became the most heavily traded ETC/ETF on the London Stock Exchange (LSE) and quickly became the fastest growing ETC. Once prices started to fall towards $50 per barrel, long oil ETCs, including ETFS Brent Oil (OILB) and ETFS Crude Oil (CRUD) then became the ETC of choice. During 2008, oil ETCs accumulated $450m of inflows to reach nearly $600m in AUM – a record for oil ETCs of which most came in the last two months of 2008. At the same time, assets in ETFS Short Crude Oil significantly reversed, falling from $350m to under $30m.
ETFS Short Gasoline (SGAS) was the best performing ETC of 2008, returning 94%. Short ETCs were listed in February 2008, substantially increasing the investment strategies available to investors. Short ETCs move inversely to the daily percent change in the underlying commodity index, allowing investors to hedge long positions, make pairs trades or profit from falling markets. Expectedly, many other Short ETCs also performed well in 2008 with the best performing Short ETCs being industrial metals. ETFS Short Industrial Metals DJ-AIGCI (SIME) and ETFS Short Copper returned 72% an 82% respectively.
Source:ETFWorld.co.uk – ETFSecurities ltd