Total Assets Under Management (AUM) grow in the past 5 weeks by 25% to…
over $2.9 billion. Last week alone, ETF Securities experienced one of its biggest ever weeks for AUM growth of over $170 million. This demand has been a result of investors wanting to persify their investment portfolio into other asset classes which exhibit low correlation to equities and bonds.
ETF Securities has also seen record flows into its new Forward (Exchange Traded Commodities) ETCs.
The Forward ETCs, which were listed on the London Stock Exchange, Deutsche Borse and Euronext Paris in the last two months of 2007, are the first ever listed products to track new Dow Jones – AIG forward commodity indices.
The forward ETCs are designed to provide investors with less volatility and more options regarding exposure to backwardation and contango in the commodity markets. As a result the Forward ETCs are proving popular among those seeking to make a strategic allocation to commodities.
The Forward ETCs have gained over $130 million of assets since their launch in October 2007 with 200% growth in the past 4 weeks alone.
The asset growth is largely due to precious metals and agriculture ETCs, which have both seen the greatest AUM increase and also highest returns over the past 6 weeks. Combined, precious metals and agriculture ETCs have contributed to over 80% of the recent AUM growth.
Precious metal ETCs have now accumulated over $1.1 billion of assets since April 2007. In the past 6 weeks, precious metal ETCs have added $260 million or 43% of new assets during that time.
The new assets have been shared equally amongst platinum, silver, gold and a precious metals basket. Over the same 6 week period commencing 3rd December 2007, platinum and palladium prices both rose by 8%, the gold price increased by 13% with silver earning a 15.5% return.
In comparison, the S&P500 index fell by almost 5% while the FTSE 100 Index fell by approximately 3% over that same period.
Agriculture ETCs have now accumulated over $1.0 billion of assets since their launch in September 2006. In the past 6 weeks, agriculture ETCs have added over $300 million with $233 million or 37% of total new assets being added to three specific agriculture ETCs: ETFS Agriculture DJ-AIGCISM, ETFS Grains DJAIGCISM and ETFS Softs DJ-AIGCISM. Agriculture prices have also continued to rise in the first two weeks of 2008 after a number of them (for example wheat and soybeans) were the best performers in 2007. Prices of ETFS Agriculture DJAIGCISM, ETFS Grains DJ-AIGCISM and ETFS Softs DJ-AIGCISM are up 10% to 15% since 3rd December 2007.
Matching the rapid rate of AUM growth has been the increase in ETC trading volumes.
European ETC trading volumes reached $415 million last week. This is up 112% from $195 million during the first week of December. The growth since the start of 2007 is even more impressive with average daily volumes increasing eight-fold from $10 million per day to $80 million per day.
Commenting on the response of investors for ETF Securities’ explosive growth in 2008 , Nik Bienkowski, Head of Listing and Research, said:
“Continued equity market volatility combined with economic uncertainty regarding inflation and growth are weighing down equity markets. News regarding the effects of the sub-prime crisis with new reports of significant capital raisings being made by the world’s major investment banks is adding to the flow of negative news surrounding the financial markets.
It is during these times that commodities and precious metals have tended to outperform. Analysis of historical returns has shown that due to commodities’ low correlation with equities, commodities have tended to outperform equities when equities experience negative monthly and annual returns. On average, when equities experienced a negative 12-month return, commodities showed a positive 12-month return approximately 70% of the time.
As a result, ETF Securities’ has experienced record growth of ETCs over the past six weeks, with precious metals and agriculture experiencing the greatest demand. Demand for precious metals and index ETCs also reflects investor’s desire to allocate part of their portfolios from equities to commodities.”