Top performance by commodities
2 July 2008

Written by Harriet Wigmore

Commodities were once again the top performing asset class for the first half 2008, according to ETF Securities.

In the last ten years, commodities have outperformed equities by a ratio of four to one, with real estate being the top performer 30 per cent of the time, bonds ten per cent, equities ten per cent and hedge funds 0 per cent of the time. With the economic slow down affecting markets, equities and real estate were the worst performing asset classes for the second consecutive quarter. For the first half of the year the S&P500, the DJEuroStoxx50 and the FTSE100 all reported losses of at least -10.5 per cent, meaning the EFTS All Commodities ETC outperformed equities by around +40 per cent in six months.

Following the commodities’ outperformance and also as a result of the continued turmoil in the world of equity and credit markets, ETF Securities’ assets under management (AUM) increased to $6.3bn (a rise of around 152 per cent) in the first half.

The results also show the importance of asset allocation and a diversified portfolio particularly as first half results showed that returns within equities are becoming increasingly correlated with a different range of indices and strategies all being highly correlated; this is believed to be a result of factors including rising global financial and real economy integration over the last decade.

Noticeably, increased demand has occurred across all commodities. Nik Bienkowski, chief operating officer at ETF Securities commented: “There has been a significant increase in demand for ETCs linked to the price of a wide range of commodities. Most recently, this demand has been for precious metal, agriculture and livestock ETCs as investors seek to diversify their portfolios away from equities, real estate and hedge funds into other asset classes.”