Commodities | Mar 14 2008
By Chris Shaw
In what was a timely move given the current state of commodity markets Barclays Capital held its fourth annual Commodity Investors Conference last week, with surveys of the investors in attendance offering some insights into expectations for the various commodity markets.
One conclusion from the conference is volatility in commodity markets is set to increase as a majority of investors indicated they would be likely to move beyond simple index exposure to the adoption of more active management strategies going forward, more than 60% of attendees intending to either combine passive and active strategies or adopt totally active strategies.
Interest in new markets and products is also high judging by the responses of those at the conference, particularly as it relates to investment in products linked to climate change. For many respondents this means gaining exposure to emissions markets as this is seen as a growth area with significant potential, with 40% intending to do so via direct exposure to alternative energy equities and 36% seeing carbon emissions trading as the preferred method of gaining leverage to the climate change market.
In terms of where money is likely to be made in coming months Barclays notes more than half (53%) of those at the conference saw agricultural commodities as offering the best returns among the various commodity markets in 2008, which fits in with the current conditions as traditionally during periods when global recession is a concern it is the agricultural and precious metal markets that tend to outperform the energy and base metal sectors given the latter two are more closely linked to the economic cycle.
As Barclays points out the current cycle is somewhat different given there are binding supply constraints throughout the supply chain at the same time as there is strong demand from emerging nations such as China and India, meaning base metal and energy prices have gone against history somewhat in terms of recent performance.
Concerns over the global growth outlook have not prevented an overall bullish outlook on oil prices being formed as Barclays notes a majority of those in attendance expect the oil price to average more than US$100 per barrel over the next five years.
