- Safe haven buying results in Gold ETC inflows of $265m
- Total net inflows of $355 million experienced across all ETCs, including agriculture, industrial metals and precious metals
- Credit crisis helps Leveraged ETCs to increase by 400% in 11 weeks
- ETFS Leveraged Gold (LBUL) sees $82m inflows
- Two Gold ETCs in top 4 LSE traded ETCs/ETFs, trading $1.2 billion in June 2008
ETF Securities Limited, the global pioneer of exchange traded commodities (ETCs), saw record inflows in its Exchange Traded Commodities platform yesterday. Inflows were experienced across a variety of commodities and ETCs yesterday with precious metals, agriculture, industrial metals and Leveraged ETCs making the largest contribution to yesterday's record breaking day. Gold was the most popular ETC yesterday but even ETFS Agriculture (AIGA) bucked a recent trend by adding $50 million. Excluding the recent acquisition of Gold Bullion Securities, ETF Securities' total assets have grown by $1.7 billion or 30% in the past 11 weeks to $6.6 billion, with the five physical precious metals contributing more than 50% of inflows, to reach a record $2.7 billion.
Records for ETC inflows were shattered as investors have continued to seek uncorrelated asset classes to equities. As equities continue to show volatility due to the year long credit crisis, ETCs continue to outperform. ETCs have persisted to show that their returns are uncorrelated to equity market returns, adding to their appeal as investors shun equities while global equity markets plunge to multi-year lows and credit markets reel on concerns of mounting losses.
Safe haven buying saw ETF Securities' Precious Metals platform experience huge demand, contributing 75% of net inflows yesterday. Approximately $265 million equivalent of inflows were experienced in gold ETCs alone. Gold ETCs recorded $225 million of trading on the London Stock Exchange (LSE) on the same day the LSE issued a report showing that gold ETCs took two of the top four spots in terms of trading volumes in June 2008 on the LSE's ETC/ETF trading platform. Gold ETCs traded $1.3 billion while the two physically-backed gold ETCs captured most of this volume, trading $1.2 billion.
ETFS Short Crude Oil (SOIL), the second most traded ETC/ETF in London in June 2008 continues to break records, trading $800 million. ETFS Short Crude Oil (SOIL) is again set to break consecutive monthly trading records in July as it has already traded $750 million in the past 12 trading sessions on the LSE.
Leveraged ETCs are also proving popular as the credit crisis increases the cost of credit while also making credit harder to obtain. ETFS Leveraged Gold (LBUL) saw inflows of $82 million yesterday. The daily return on Leveraged ETCs is 2x the daily % change in the underlying commodity index (excluding fees), meaning yesterdays inflows into ETFS Leveraged Gold (LBUL) was equivalent of $164 million, making this one of the largest trades ever for an ETC. As a result of reduced liquidity in capital markets due to the credit crisis, Leveraged ETCs have been the fastest growing type of ETC over the past 11 weeks. Leveraged ETCs have grown by 400%, adding approximately $220 million to $270 million total assets.
ETF Securities now offers more than 120 ETCs which give investors greater choice to implement different investment strategies with the choice of physical, long, forward, leveraged and short exposure to a wide range of commodity sectors. ETCs are simple to access as they are traded in three currencies (Euros, USD and Sterling) and listed on five major European Exchanges including the London Stock Exchange, Euronext Paris, Euronext Amsterdam, Deutsche Borse and Borsa Italiana. Each Exchange has created unique ETC trading segments resulting in trading volumes exploding to $1.2 billion last week.
Commenting on the yesterday's trading, Nik Bienkowski, Chief Operating Officer, said:
"We are not surprised with yesterday's news that commodities and more specifically gold ETCs continue to shatter records for trading volumes and inflows. ETCs have been designed to be accessible, efficient, liquid and low-cost products for investors. Our platform approach to ETCs across Europe's major Exchanges allows any investor at any time to trade commodities in the same way they can buy any equity.
"Commodities have been shown to have low correlation to equities. They have also outperformed other asset classes when equity markets have been stressed. As a result, independent studies show that commodities can benefit a diversified portfolio even in the best of times. However there is no doubt that ETCs have benefited from the current financial situation affecting global equity markets.
"The demand for Leveraged ETCs also shows that the current credit crisis is making capital more expensive. Leveraged ETCs provide investors double the daily exposure for less than 1% management fee. Comparing this to deposit rates of over 7% in some cases, Leveraged ETCs are a cost effective way to gain exposure to commodities. As a result, we experienced inflows of $82 million into our ETFS Leveraged Gold (LBUL) ETC yesterday."
