Commodity Online
LONDON: ETF Securities, global pioneer of exchange traded commodities (ETCs) and provider of Exchange Traded Funds (ETFs) have reported strong surge in ETCs in recent times. ETF Securities also recorded highest ever weekly inflow into physically-gold backed ETCs last week.

Last week ETC inflows rose at their fastest pace in nearly three months with $228mn flowing into a wide range of ETCs including precious metal ETCs, agriculture ETCs and diversified ETCs. Net inflows into ETCs this year is 13% higher than at the same time last year when the commodities bull market was in full swing. Inflows total $3.4bn while assets under management (AUM) has topped $12bn.

Last month, the DJ-UBSCI All Commodities IndexSM posted its biggest monthly gain since 1991 (when historical data begun), rising by 13% as the falling US dollar boosted demand for hard assets as a hedge against inflation. ETFS Physical Gold (PHAU) rose 10.4%, while the strongest performers in May were ETFS Crude Oil (CRUD) up 26.8%, and ETFS Gasoline (UGAS) up 28.7%.
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The inflows are due to the growing concerns about the rapidly deteriorating sovereign credit outlook, inflation and financial stability as a result of aggressive quantitative easing being implemented by major central banks.

ETF Securities recorded major inflows of $150mn into precious metals last week with $111mn into the physically backed gold ETCs: ETFS Physical Gold (PHAU) and Gold Bullion Securities (GBS). ETFS Physical PM Basket (PHPM), which tracks a basket of precious metals, recorded its second largest weekly inflow ever with $23m. ETFS Platinum (PHPT) gathered $14mn last week. Trading volumes of ETF Securities' gold ETCs have also been very strong with $266m traded last week and $8.1bn YTD or an average of $73m per day.

Following precious metals, ETFS Natural Gas (NGAS) has seen the strongest investor interest recently. Last week there were $35mn of net inflows into NGAS, bringing total inflows in the month of May to $113mn, the largest monthly increase since NGAS was first listed in September 2006. ETFS Leveraged Natural Gas (LNGA) has seen a surge of inflows recently. LNGA inflows rose by $19.7mn last week, more than net inflows YTD, making LNGA the leveraged ETC with the most inflows this year after ETFS Leveraged Crude Oil (LOIL).

Three ETCs reached record AUM levels at the end of May: ETFS Natural Gas (NGAS) assets now stand at a record $150m, ETFS Copper (COPA) reached $42m and ETFS Industrial Metals DJ-UBSCISM $98m.

ETFS Agriculture (AIGA) has also seen strong investor interest with $32mn of net inflows last week, bringing total inflows this year to $290mn, behind only gold and oil. Among the ETCs tracking individual agricultural commodities, last week ETFS Corn (CORN) and ETFS Sugar (SUGA) were the most popular.

Commodity-related equities which currently offer the only access to underlying commodities such as coal, steel or water in a tradeable security, have also experienced extremely strong performances with equity ETFs such as ETFS Russell Global Coal Fund (COAL - which tracks companies engaged in the global coal industry), up 34.1% in May and 93.4% in the last 3 months and ETFS Russell Global Steel Large Cap Fund (STLL - which tracks steel related companies) rising 27.7% in May and 77% in the last three months. These two funds outperformed the MSCI World Index respectively by 63% and 47% since the end of February 2009.

ETF Securities now offers more than 140 ETCs & ETFs with over $12 billion in assets. The ETCs & ETFs provide investors with a wide variety of investment strategies, with ETCs offering physical, long, forward, leveraged and short exposure to all major commodity sectors. ETCs are simple to access as they are traded in four currencies (EUR, USD, GBP and AUD) and listed on six major exchanges globally including the London Stock Exchange, NYSE-Euronext Paris, NYSE-Euronext Amsterdam, Deutsche Börse, Borsa Italiana, the Irish Stock Exchange and the Australian Securities Exchange.

Nicholas Brooks, Head of Research and Investment Strategy said: "The strong rally in commodity prices and flows into exchange traded commodities has coincided with a rise in a wide variety of global cyclical indicators and a general improvement in investor sentiment. It is interesting to note however, that inflows into ETCs have been building since last November, well before the recent rally, indicating that the surge in demand for commodities is being driven by more than just cyclical factors."

"Growing investor concerns that the sharp rise in major country debt levels and aggressive quantitative easing will impact sovereign ratings, currency values and potentially cause inflation to rise sharply appears to be causing investors to raise their holdings of hard assets. In addition, current long-term supply-demand fundamentals and portfolio diversification benefits are bringing long-term investors into commodities. ETFS Physical Gold (PHAU) has seen particularly strong demand, though more recently ETFS All Commodities (AIGC), ETFS Agriculture (AIGA), ETFS Industrial Metals (AIGI) and ETFS Natural Gas (NGAS) have seen increasing inflows, indicating investors are broadening, as well as deepening, their exposure to the commodities markets."