- Gold was the star performer in 2008 with a 44% return in GBP terms, outperforming equities
- Commodities remain best performing asset class over five and ten years
- Strong increase in net inflows into ETFS physically-backed gold products in 2008
- Oil inflows continue as long oil ETCs reach new records
- Short ETCs best performers in 2008 with ETFS Short Gasoline (SGAS)
the best performing ETC returning 94%
ETF Securities recently published it's annual review of the past year's commodity markets. The review, titled "Commodities review 2008" shows that commodities continue to outperform other asset classes. Gold was one of the best performing assets during 2008 while commodities generally have outperformed over five and ten years.
While falling substantially in 2H08 due to broad market falls and deleveraging, broad commodity indices still managed to outperform equities in 2008. DJ-AIG Commodity Index 3 Month ForwardSM (FAIG) fell 30% in 2008 compared to a 42% in the MSCI AC World Index. Although many assets fell in unison last year during the peak of the credit crisis, what really stands out is commodities' outperformance over longer periods. The DJ-AIG Commodity Index 3 Month ForwardSM returned 70% and 272% over five and ten years compared to 0% and -2% for the MSCI AC World Index and -10% and -13% for the S&P500 Index over the same periods.
ETFS Physical Gold (PHAU) was the best performing commodity in 2008, up 4% in USD terms while most other asset classes suffered significant falls. The gold spot price rose 44% in GBP terms and 11% in EUR terms during the year. By comparison, gold outperformed equities (as measured by the MSCI AC World Index) by more than 46% in USD terms. This outperformance was driven by gold's low to negative correlation with equities, the fact it is not subject to credit risk and also its status as a safe haven asset.
As a result, there was continued net inflows into ETFS Physical Gold (PHAU) and Gold Bullion Securities (GBS) during 2008. Physically backed gold ETCs now total $4.8 billion in assets under management (AUM), while also recording the highest trading volumes.
In 2008, energy and oil prices attracted a great deal of attention. At the time oil prices peaked at around $147 per barrel, ETFS Short Crude Oil (SOIL) became the most heavily traded ETYC/ETF on the London Stock Exchange and quickly became the fastest growing ETC. Once prices started to fall and approach $50 per barrel, long oil ETCs, including ETFS Brent Oil (OILB) and ETFS Crude Oil (CRUD) then became the ETC of choice. During 2008, oil ETCs accumulated $450m of inflows to reach nearly $600m in AUM - a record for oil ETCs of which most came in the last two months of the year. At the same time, assets in ETFS Short Crude Oil significantly reversed, falling from $350m to $10m.
ETFS Short Gasoline (SGAS) was the best performing ETC of 2008, returning
94%. Short ETCs were listed in February 2008, substantially increasing
investors' available investment strategies in commodities. Short ETCs move
inversely to the daily percent change in the underlying commodity index,
allowing investors to hedge long positions, make pairs trades or profit from
falling markets. Expectedly, many other Short ETCs also performed well in
2008 with the best performing Short ETCs being industrial metals. ETFS
Short Industrial Metals DJ-AIGCI (SIME) and ETFS Short Copper returned 72% an
82% respectively.
| Top Performing Short ETCs | 2008 | 3 Yrs | 5 Yrs | 10 Yrs |
| ETFS Short Gasoline | 94% | 48% | -35% | -92% |
| ETFS Short Lead | 82% | -47% | -76% | -84% |
| ETFS Short Industrial Metals DJ-AIGCISM | 72% | 3% | -41% | -62% |
| ETFS Short Copper | 72% | -11% | -66% | -77% |
| ETFS Short Petroleum DJ-AIGCISM | 66% | 26% | -44% | -93% |
| ETFS Short Nickel | 64% | -49% | -57% | -95% |
| ETFS Short Energy DJ-AIGCISM | 61% | 113% | 4% | -87% |
| ETFS Short Zinc | 61% | -11% | -54% | -51% |
| ETFS Short Crude Oil | 60% | 18% | -47% | -94% |
| ETFS Short Heating Oil | 56% | 24% | -51% | -93% |
| Top Performing Long ETCs | 2008 | 3 Yrs | 5 Yrs | 10 Yrs |
| ETFS Physical Gold | 4% | 70% | 109% | 202% |
| ETFS Precious Metals DJ-AIGCISM | -4% | 54% | 99% | 176% |
| ETFS Forward Live Cattle | -14% | 2% | 50% | 86% |
| ETFS Forward Livestock DJ-AIGCI F3SM | -15% | 3% | 86% | 157% |
| ETFS Physical PM Basket | -15% | 34% | 66% | 119% |
| ETFS Forward Lean Hogs | -17% | 3% | 140% | 281% |
| ETFS Brent 3yr | -17% | 18% | n.a | n.a |
| ETFS Forward Grains DJ-AIGCI F3SM | -19% | 64% | 42% | 44% |
| ETFS Sugar | -20% | -47% | -1% | 24% |
| ETFS Soybeans | -21% | 31% | 23% | 101% |
All returns are based on actual index data or underlying commodity indices excluding fees. Returns are in USD, dates are from the 31st December 2003 (5 Yrs), 2005 (3 Yrs), 2007 (1 Yr) to the 31st December 2008.
In total, ETF Securities now offers more than 130 ETCs with over $7.2 billion in assets. The ETCs provide investors with a wide variety of investment strategies with ETCs offering physical, long, forward, leveraged and short exposure to all 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. Most recently, ETF Securities listed Europe's first carbon ETC - ETFS Carbon (CARB) is designed to track the price of carbon emissions allowance futures traded on ICE.
Commenting, Nik Bienkowski, Chief Operating Officer, at ETF Securities, said:
"Last year was a year of three parts. The first half of 2008 experienced large flows into a broad range of ETCs including agriculture, livestock, precious metals and energy. The second part of the year was marred by the credit crisis taking effect with outflows across the financial industry including commodities experienced. The final part of 2008 was marked by investors returning to liquid and transparent products, with a focus on oil and gold for commodities.
"In 2009, we expect investors to continue to look for ways to profit in the current market however there will be increasing focus on liquidity, credit and transparency - ETCs solve all these problems."
Commenting, Nicholas Brooks, Head of Research and Investment Strategy, at ETF Securities, said:
"Commodities have generally weathered the financial storm better than their equity counterparts, with the DJ-AIG Commodity Index 3 Month ForwardSM down 30% last year compared to a 42% fall in the MSCI AC World Index. Over the longer term the outperformance of commodities has been more pronounced, with DJ-AIG Commodity Index 3 Month ForwardSM up 70% and 272% over five- and 10-year horizons. Over the same periods, the S&P 500 is down 10% and 13% respectively.
"ETFS Physical Gold (PHAU) has been a particularly strong outperformer, with 2008 returns up 4% in US dollar terms (marking the eighth consecutive year of positive returns) and up 44% in GBP and 11% in EUR. In 2009 safe haven assets such as gold and less economically sensitive commodity sectors could see the strongest flows, although our platform of oil ETCs has seen $435m of inflows over the past nine weeks as oil has traded in the $40 to $50 range."
