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ETF Securities Limited, the global pioneer of exchange traded commodities (ETCs), has seen total Assets Under Management (AUM) grow in the past month by 32% to over $3.3 billion. Last week alone, ETF Securities experienced a record breaking month for AUM growth of $800 million. This demand has been a result of investors wanting to diversify their investment portfolio into other asset classes which exhibit low correlation to equities and bonds.
Precious metal ETCs have now accumulated over $1.5 billion of assets, with most of these assets having been accumulated since May 2007. In the past month, precious metal ETC assets have increased by $330 million or 28%. ETFS Physical Platinum (PHPT) and ETFS Physical Gold (PHAU) have contributed nearly $250 million of these new assets with platinum breaking all records.
The increase in assets has occurred on the back of volatile equity and bond markets, with the major equity markets falling by 5% to 10% in January. This volatility has in turn caused a flight to non-correlated assets such as precious metals. During this period, precious metals have outperformed, experiencing returns of 8% to 16%.
Most recently, ETFS Physical Platinum experienced a huge amount of interest with assets growing by $95 million last week. ETFS Physical Platinum is now the largest platinum ETC in the world with over $330 million in assets. Including ETFS Physical PM Basket which consists of a 21% allocation to platinum, ETF Securities now holds over 210,000 ounces of physical platinum. On an annualised basis, this represents nearly 5% of annual new mine production. Similar to the highly successful gold ETCs whose combined bullion holdings ranks 5th amongst the world's central banks, ETFS Physical Platinum is liquid and transparent and is accessible to all investor types.
All physical precious metal ETCs are backed by physical, allocated metal - uniquely identifiable bars which carry no bank credit risk. The precious metal bars and ingots are held in trust in London by the Custodian HSBC Bank USA N.A., who is the world's leading Custodian for ETCs with approx $25 billion of precious metals being held for such products. The metal held with the Custodian must conform to the rules for Good Delivery of the London Bullion Market Association (LBMA) and London Platinum Palladium Market (LPPM). ETCs are only issued once metal is confirmed as being deposited into the Issuer's bullion account with the Custodian.
Weekly ETC trading volumes have also exploded to $450 million, up over 150% since December. Of this, precious metal ETC trading has increased from $80 million per week to $280 million last week, an increase of 250% over the past month. In addition to market conditions which are supportive of precious metals, the increase in trading volumes is also a result of multiple European listings complemented with the largest number of Authorised Participants and market makers of any ETC or ETF (Exchange Traded Fund). Last week, 62% of ETC trading volume was due to precious metal ETCs.
In addition to gaining un-leveraged short exposure to precious metals, soon investors will have the option to gain short or leveraged exposure through an offering of 66 Short and Leveraged ETCs. The new ETCs are expected to be listed on the London Stock Exchange in the next few weeks and will provide investors access to a wide range of investment and trading strategies. Short ETCs will enable investors to gain from falls in commodity prices. Leveraged ETCs will enable investors to gain from rising commodity prices, providing exposure with 50% less capital.
Commenting on the response of investors for ETF Securities' precious metal ETCs, Nik Bienkowski, Head of Listings and Research, said:
"There has been a significant increase in demand for ETCs linked to the price of commodities and particularly precious metals. Most recently, this demand has been for platinum and gold ETCs as investors seek to diversify their portfolios away from equities and bonds and into other asset classes.
"Given the current market uncertainty regarding the banking sector, we have seen strong inflows into physically-backed precious metal ETCs which have grown 25% in January. In addition, increasing demand and stagnant supply, coupled with the recent power shortages in South Africa, the world's largest producer of platinum, helped ETFS Physical Platinum to break its AUM and trading volume records last week.
"Overall there has been a huge surge in global demand for ETCs. $35 billion has been in invested in ETCs over the last three years, with approximately 70% ($25 billion) invested in precious metals."
