Commodity Assets Expand for First Time Since August After Rally

Commodity investments grew for the first time since August as prices of coffee to cocoa to hogs surged, and the trend may continue, Barclays Plc said.

Raw-materials assets under management expanded $13 billion last month to $327 billion, with exchange traded products gaining $6 billion, the bank said in an e-mailed report today. Investors added $2 billion to commodities from precious metals to agriculture and energy, while rising prices also boosted the assets. The Standard & Poor’s GSCI gauge of 24 raw materials rose 4.4 percent last month, the most since July.

“The tide may at last be starting to turn for commodity investment flows,” Kevin Norrish, a Barclays analyst in London, wrote in the report. “The biggest change in flows was in the ETP sector, where a recovery in precious metals buying resulted in the first net inflow, just over $1 billion, to the sector in 14 months.”

Outflows from all commodity investments were $47.1 billion last year, as money was withdrawn from precious metals, energy, industrial metals and agriculture, Barclays said. That marked the first drop since 2002 and biggest outflow since 2008.

Coffee, lean hogs and silver were the biggest gainers last month as U.S. natural gas, heating oil and copper fell. Forty-seven out of 65 commodity indexes tracked by Bloomberg have gained this year.

Benchmark Indexes

“Strong” returns in benchmark indexes since the start of the year, a negative correlation to other assets and an end to gold liquidation contributed to the positive flows, Barclays said. Index investments rose to $121 billion from $114 billion and exchange-traded products grew to $120 billion from $114 billion, according to Barclays.

Precious metals investments climbed to $113 billion in February from $107 billion the month before, while energy holdings expanded by $4 billion to $104 billion. Agriculture investments added $3 billion to $71 billion, Barclays said.

The S&P GSCI fell 1.4 percent last week as weaker-than-estimated industrial output in China signaled slower demand for everything from oil to copper.

“Concerns about the health of the Chinese economy have intensified, which, alongside rapidly growing supply in some markets such as oil and large surpluses in some metals, are keeping investors cautious,” the bank said.

Outflows will probably be slow in the next few months as investors seek to diversify their assets, the bank said. The MSCI All-Country World Index of equities fell 1.7 percent this year while the S&P GSCI gained 1.5 percent.

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