In the first two months of 2017, European investors poured almost €4bn into commodity ETFs, while flows into actively managed commodity funds were negligible. That follows record net flows of €12.2bn into commodity ETFs in 2016.
Source’s product specialist Chris Mellor said the flows are evidence that “investors wanting to diversify their portfolios are turning to commodities.”
“That makes sense given the low correlation commodities have with equities and bonds, and especially now that some equity valuations may look stretched,” he added.
The vast majority of this year’s commodity flows have trickled into ETFs that track the Bloomberg Commodity Index, according to Mellor.
Seeing an opening in the market for low-cost commodity ETFs, Source unveiled its own Bloomberg Commodity ETF in January.
Boasting a total cost of 0.4% per annum, made up of an ongoing charge of 0.19% and swap fee of 0.21%, Source said the fund has already attracted over $1bn since its launch.
“Investors have been crying out for a more competitively priced, simple commodity ETF,” Mellor explained.
“Prior to this launch the lowest cost commodity ETF in Europe had an ongoing charge of 0.35% and a total cost of 0.75% per annum, almost twice as much as our fund.”