21/11/2009
LONDON, Nov 20, 2009
A record $60 billion will have poured into commodities by the end of this year, Barclays Capital said, after a dip in oil prices provided an entry point for investors seeking to diversify into riskier assets.
"Investment flows into commodity markets have come in at unprecedented levels this year," Barclays Capital said in a research report dated Nov. 19.
"Absent any significant reversal in the macroeconomic outlook, we expect investment flows to remain strong throughout Q4 2009, heading for a record high of $60 billion for the year as a whole and with commodity assets under management (AUMs) likely to end the year at about $230-240 billion."
Barclays Capital's figures showed strong inflows in October continuing into November with total money into commodities year-to-date already approaching a record $55 billion, displacing the previous record of $51 billion in 2006.
The figures cover long-only passive investors such as exchange-traded products, structured products and commodities index swaps.
Those wanting to enter commodities found an opportunity after last year's price crash when oil, for instance, dived towards $32 a barrel, down from a record of nearly $150 hit in July.
U.S. crude futures <CLc1> started the year at around $40 a barrel.
"Sharp falls in commodity prices earlier in the year created opportunities for long-term exposure, providing an opportunity for investors to act on their interest in commodities," Barclays said.
It predicted commodities would regain their value as portfolio diversifiers, rising when other asset classes fall.
This year has been an exception in that commodities have risen in line with a rally across a wave of asset classes, driven by the vast amounts of liquidity central banks have provided in response to government stimulus plans.
"The lack of differentiation between asset classes late in 2008 and in the early part of this year did dent investor confidence, but in our view was a mere aberration from the usual trend, rather than the establishment of a new norm," the report said.
Commodity investment returns are now at their highest level since the second quarter.
"Over the course of the fourth quarter so far, total returns on the S&P GSCI <.SPGSCI> are up almost 11 percent, matching the pace of gains in Q2 and far outstripping the modest pull-back in Q3. Our own portfolio of selected commodity exposures is up an average of 12.2 percent since its initiation in late September, reports REuters."
