Exchange-traded funds for base metals are unlikely to attract as much demand as those for gold and silver, according to Deborah Fuhr, head of ETF research at BlackRock Inc. (BLK), which is planning a product backed by copper.
“I don’t expect them to be as popular as gold and silver, that’s my personal view,” said Fuhr, who’s led the ETF research team at the world’s largest asset manager since September 2008. Caroline Hancock, a BlackRock spokeswoman, declined comment, citing regulatory constraints as the New York-based company applies for the copper-backed exchange-traded fund, or ETF.
Commodity-backed funds and products have proved popular with investors seeking to diversify their portfolios as prices for metals, grains and energy gain on increased demand. They enable buyers to invest in commodities without taking physical delivery of them. Gold held in exchange-traded products climbed to 2,050.33 metric tons yesterday, from 12 tons in 2003, when Bloomberg started data tracking such holdings.
“I don’t think many people have an allocation in their portfolio that would be for individual commodities beyond gold and silver,” Fuhr, who spent 11 years at Morgan Stanley before joining BlackRock, said in an interview in Singapore last week.
ETF Securities Ltd. started products for copper, tin and nickel in December, the first ever. BlackRock and JPMorgan Chase & Co. said separately last year they plan physical-copper funds. The new funds for base metals won’t have a long-term impact on prices, Goldman Sachs Group Inc. said in an October report.
Stocks and Bonds
Assets in global commodities exchange-traded funds and products totaled $190.6 billion in February, and accounted for about 12 percent of a global industry worth $1.54 trillion, according to BlackRock data. The commodity investments are used as for diversification from stocks and bonds, rather than as core holdings, Fuhr said.
Gold has attracted investors as the metal has rallied for 10 years to last year, climbing even during the 2008 financial crisis that caused slumps in equities, oil and base metals. Immediate-delivery gold, which traded at $1,458.65 an ounce at 7:45 a.m. in London, touched a record $1,478.18 on April 11.
Silver held in exchange-traded products has risen to a record 15,509.54 tons, according to Bloomberg data tracking four providers. The metal has gained 30 percent this year and traded at $41.9525 an ounce on April 11, the highest level in 31 years.
“The fastest-growing product we have seen is gold,” Frank Henze, managing director at SPDR Exchange Traded Funds, Asia Pacific at State Street Global Advisors, said on April 11 in Singapore. State Street Corp. (STT)’s money-management unit ranks second as an ETF provider after BlackRock, which has the iShares Gold Trust and Silver Trust listed in New York.
The amount of copper held in ETF Securities Ltd.’s ETF Physical Copper fund rose to 2,604 tons today from about 25 tons at the start in December, according to the company’s website. Based on yesterday’s cash price, the holdings were worth about $25.2 million and accounted for 0.4 percent of stockpiles monitored by futures exchanges in London, New York and Shanghai.
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