Commodities | Jul 04 2008
By Chris Shaw
While it remains far too early to tell whether the sell-off earlier this week signals the beginning of a shift by investors out of the commodity sector, Barclays Capital points out a trend already becoming established in recent months has been the increase in popularity of more complex products within the sector.
For example, the group points out the issuance of commodity structured products is increasing sharply and in value terms now stand at double last year’s levels. This suggests investors in the sector are becoming more sophisticated while also indicating a growing interest in new markets and the targeting of markets with attractive time structures.
The group also notes a significant flow of funds into commodity-based exchange traded products in recent months, with some gold and platinum products currently enjoying all-time record inflows and products allowing for the holding of short positions also increasing in popularity.
On Barclays’s numbers the first half of 2008 saw new structured commodity products worth US$7.8 billion issued, which is almost double the amount for the same time period last year. Most popular in the June quarter were commodity index link structured notes where around US$1.8 billion worth of products were issued.
A good portion of these were related to agricultural commodities, while more unusual products linked to freight, biofuels and emissions are also growing in popularity based on inflows into such products. On the other hand base metals continue to lack popularity with respect to structured products, Barclays noting only a little over US$200 million of such products were issued in the first half of the year.
