The latest numbers on the amount of money invested in commodities were reported in the press. There is close to $367 billion in assets under management in commodities with a boost of $5.2 billion in the first quarter. Once the numbers are reviewed in more detail it is less clear whether investors are using commodities as a a diversification tool.
$155 billion of the $367 billion is in ETP's. This is the portion that is treating the commodity markets like another equity market. $120 billion of the ETP AUM is associated with precious metals, $9 billion is linked to the energy markets, and only $19.5 billion is exposure to the broad based commodities.
It s surprising that the majority of the ETP exposure is concentrated in gold which does not track or represent broad based exposure to commodity markets. Investor are not buying commodities for their diversification benefit as much as they are buying for the unique exposure to the gold market. If the conditions for gold change, these investors will be disappointed and they would never have received the price appreciation from the supply shocks across the broad set of commodity markets.
$155 billion of the $367 billion is in ETP's. This is the portion that is treating the commodity markets like another equity market. $120 billion of the ETP AUM is associated with precious metals, $9 billion is linked to the energy markets, and only $19.5 billion is exposure to the broad based commodities.
It s surprising that the majority of the ETP exposure is concentrated in gold which does not track or represent broad based exposure to commodity markets. Investor are not buying commodities for their diversification benefit as much as they are buying for the unique exposure to the gold market. If the conditions for gold change, these investors will be disappointed and they would never have received the price appreciation from the supply shocks across the broad set of commodity markets.
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