European investors ready to increase commodities allocation, ETF Securities
Investment professionals across Europe are planning to increase their average allocation to commodities in 2013, particularly into industrial metals such as copper, a survey run on 350 professionals by ETF Securities has found.
Across Europe, the results show that over 40% of investors plan to allocate between 8-10% of their portfolios to commodities in the year ahead.
In addition, just under a third of those surveyed in the UK and Switzerland were most concerned about the European Sovereign debt crisis, whereas the US fiscal and budget ceiling issues were deemed a greater concern by Italian and German investors.
The survey showed that in the UK, Italy and Germany, investors favour industrial metals, especially copper. The growing interest in the metal is supported by latest flows into the ETF Securities physically backed Copper ETC which showed net inflows of US$28 million during the week of the 14th January to 21st January 2013, the largest weekly inflows since it was listed on 10 December 2010.
The survey also showed that 40% of the investors currently use ETPs as their primary method of gaining their commodity exposure, followed by 20% through equities and the remainder via swaps and futures. It is thought that the use of ETPs as key investment tools is set to increase in the future partly due to changing regulatory reform across the financial services industry. Examples include the recent ESMA
Guidelines on ETFs and UCITS and the Retail Distribution Review, both of which are expected to increase the use of ETPs by advisors offering fee-based services.
Nicholas Brooks, head of investment strategy at the firm, remains optimistic on the outlook for 2013.
He said: “Global growth is showing signs of recovery, with the US and China leading the way. The monetary policy of major developed economies is expected to remain highly accommodative in 2013. Both of these factors are supportive of cyclical assets, with commodities standing out as key beneficiaries. Gold should remain a core holding for investors concerned about the potential for sovereign debt risk events in Europe and the US.”
Commenting on the current ETP industry, Matt Johnson, Head of Distribution for EMEA, ETF Securities said:
“In 2013 the ETP Industry is going to have to adhere to a number of regulatory changes. For instance, there will be a shift in the range of products that are available to investors and how they can access them. However saying that, you look at 2012 with US$400 billion gains in AUM to nearly $2 trillion and I see no reason why that won’t continue to increase in 2013. Commodity Exchange Traded Products in particular continue to see strong inflows as investor demand for hard assets increase and more investors discover ETPs as an easy and efficient way to access the asset class.”