Commodities | Apr 21 2006
Barclays Capital reports assets under management in the four major US commodity-linked funds grew 3% in March to hit US$14.2bn. This is just below the January high of US$14.4bn. Fresh inflows totalled US$293m compared to US$393m in February.
These funds, which provide investment in a broad range of commodities on a long-only basis, have attracted US$13bn since 2003. However, Barclays suggests the product is beginning to lose some of its allure.
Barclays noted yesterday (Commodity Investors Fighting The Curve: Commodities, 20/04/06) that the requirement of the funds to roll forward futures contracts has actually provided negative returns early in the year due to sharp backwardation. The two main indices that track commodity fund investment have only turned positive since last week’s substantial commodity price upswings.
The high cost of carry implied by the futures curve has meant the first quarter of 2006 was only the second consecutive negative quarter of returns since 2001, Barclays notes. Inflows over the quarter were still a healthy US$867m, but this is 40% down on last year.
Does this mean investors have begun to shy away from commodity investment? Not necessarily, says Barclays. Anecdotal evidence suggests investors might be beginning to eschew the funds, but only in favour of other more sophisticated commodity investments. So no need to panic yet.