Global commodity ETP assets rise to record quarterly high of US$178bn in Q3 2011 despite severe market turbulence
20/10/11
Global commodity exchange traded product (ETP) assets rose US$3.7bn in Q3 2011 to reach a record quarterly high of US$178.2bn, a remarkable achievement given the substantial financial and economic turbulence during the quarter. The strong headline figure, however, masks highly divergent trends at a sector level, with precious metal ETP assets surging by US$11.8bn during the quarter and all other commodity ETP sectors seeing assets fall by US$8.1bn. Gold was in fact the only bright spot, with a combination of price gains and new investor inflows pushing gold ETP assets up US$13.7bn to a record quarter-end high of US$121.7bn.
Key findings from ETF Securities’ Global Commodity ETP Quarterly for Q3 2011 include:
- Global commodity ETP assets reach a new quarterly high of US$178.2bn in Q3 2011
Global commodity exchange traded product (ETP)1 assets totalled US$178.2bn at the end of Q3 2011, boosted by strong investor demand for precious metals ETPs.
- Gold ETPs led the way with inflows2 of US$5.8bn in Q3 2011
Gold ETPs accounted for most of the growth in precious metals ETP AUM during the quarter. Almost all of the inflows occurred in July, when the combination of the US budget ceiling stand-off, anticipation of Standard & Poor’s removal of the US’s AAA sovereign rating, and deteriorating sovereign conditions in Europe drove gold ETP inflows up US$5.6bn, the second largest monthly increase on record. Around 70% of these inflows were into US listed ETPs, indicating US investors were particularly shaken by the anticipate US sovereign downgrade and budget stand-off. The surge in gold ETP demand in July 2011 is surpassed only by the record-breaking US$7.1bn increase in May 2010 when Greece’s debt problems changed investors’ perceptions of the long-term viability of the Euro. In August and September most the net gold buying was in European listed physically-backed gold ETPs (US ETPs saw modest net outflows), indicating growing sovereign contagion to Italy and Spain and rising European banking sector risks took over as the key driver of gold demand during the final two months of the quarter.
- Non-precious metal commodity ETP assets decline as investors turn risk-averse
Weakening global growth and rising concerns about sovereign debt caused assets in almost all non-precious metal commodity ETPs to fall as investor de-risking drove prices lower and caused a re-direction of investor flows into cash and G3 government bonds. In the year to September, non-precious metal ETPs experienced net outflows of US$5.6bn. Broad diversified commodity ETPs, after seeing extremely strong inflows in the first four months of the year when global growth was rising and risk appetite was strong, have seen the largest outflows, with US$1.4bn leaving the funds in Q3 2011. Agriculture saw the next largest outflows of US$692m, followed by energy with US$586m of outflows (concentrated in natural gas and oil) and finally industrial metals with US$275m of outflows.
Commenting, Nicholas Brooks, Head of Research and Investment Strategy, said:
"It has been a turbulent year for commodity ETPs, with rising growth and risk appetite in the first few months of the year driving strong demand for more cyclical commodities, and then the downturn in global growth and falling risk appetite driving these flows out over the summer and through the third quarter. The one constant has been strong demand for precious metals ETPs – particularly gold – as investors have sought out the security of physically-backed gold ETPs as a hedge against currency debasement risks and the generalised rise in European sovereign and financial sector default risks. With developed economy sovereign risks and the need for low to negative real interest rates likely to remain in place well into 2012, demand for physically-backed precious metals ETPs is likely to remain well supported. As the sovereign debt issues are addressed and global growth regains its footing, broad commodity ETP flows may increase as well."
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Notes to Editor:
About ETF Securities
ETF Securities is a leading, independent exchange-traded products provider with expertise in commodities. Our pioneering work in this asset class is complemented by specialist capabilities in currencies, as well as thematic equities such as mining, infrastructure and natural resources. We are dedicated to developing liquid, transparent investment solutions that can be traded on world stock exchanges.
The company has a strong history of product innovation and this remains a key tenet of our guiding philosophy. Our management team listed the world’s first gold exchange-traded commodity in 2003, and many other market-leading investment solutions have since followed. Today ETF Securities provides what we believe to be the world’s most comprehensive range of exchange-traded commodities and is responsible for more than US$25 billion in global investor assets*.
We strive to exceed the expectations of commodity investors worldwide by aiming to deliver best of breed products, insightful investment research and excellent client service.
*As at 30 September 2011, ETF Securities' assets under management totalled US$26.7bn.
1 Commodity Exchange Traded Products (ETPs) include all stock-exchange listed commodity ETFs, ETCs, ETNs, Grantor and other Statutory Trusts. The data does not include ETPs tracking the equities of companies involved in commodities.
2 "Flows" refers to the net inflows (or outflows) of money into (out of) an ETP. “Assets” or “Assets Under Management” (AUM) refers to net inflows (or outflows) of money multiplied by the ETP's price. Flows therefore measure net new purchases/sales of an ETP excluding the impact of price changes of the ETP. "Assets" include the impact of changes in the ETP's price.
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