The $300bn question

- "Commodity investments in July passed an important milestone when AUM surpassed $300bn for the first time as commodity inflows bounced back, up by $5bn compared with June’s $2.3bn and prices strengthened. Growth in index swaps was the main driver, more than offsetting a large outflow of funds from ETPs, especially from physically backed gold products. Over the past 10 years, commodity AUMs have risen by $290bn with investment inflows having amounted to $245bn, at an annual average rate of about $24bn."
- "Will those inflows continue? In our focus piece this month we examine two issues at the top of commodity investors’ list of concerns. First, the long-term demand growth outlook for commodities, and whether emerging market demand will be sufficient to offset slower growth ahead in industrialised markets. Second, we examine the recent close correlation of commodities with other risky assets, which has prompted debate about the value of commodities as a distinct asset class."
- "Trading strategy in commodities is more complicated than it was a few months ago when we still saw considerable upside potential across a wide range of markets. The bounce in a number of energy and industrial metals markets that we had been expecting finally arrived in July and early August, though it has proved short-lived. Also, with markets focusing on slowdown fears in the US and China we are reducing some risk by closing out long base metals positions and have instituted an outright short in US natural gas. However, we remain long crude oil, gold, corn and cotton."

Barclays Commodity Investor Aug2010

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