Commodities to Get Record $60 Billion

Commodities will likely attract a record $60 billion this year as investors seek to diversify their assets. Inflows so far this year are almost $55 billion, already more than the previous full-year record of $51 billion set in 2006, Barclays Capital said in a report. Total commodity assets under management will probably expand to $230 billion to $240 billion by the end of the year.

Sharp falls in commodity prices earlier in the year created opportunities for long-term exposure, providing an opportunity for investors to act on their interest in commodities as a diversification tool.

The S&P GSCI Index of 24 commodities rose 46 percent this year, rebounding from last year’s 43 percent slump, as governments spent at least $12 trillion to lift their economies from the worst recession since World War II. Copper, lead and sugar doubled and gold reached a record.
A strong end to the year for commodity prices does look likely, especially if the dollar continues to weaken, which should be especially beneficial for gold.

Commodity funds accounted for almost three-quarters of inflows this year, including bonds, equity and emerging markets. Investment products linked to commodities attracted $1.34 billion in the week ended Nov. 18, the most in 3 1/2 years, bringing the year-to-date total to $13 billion.

Funds investing in physical commodities, rather than stocks of commodity producers, dominated the action.