Funds switch into commodities in July-EPFR Global

LONDON, July 20 Wed Jul 20, 2011 7:51am EDT

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LONDON, July 20 (Reuters) - Investors rotated into commodity funds in the first two weeks of July, according to data from fund flows tracker EPFR Global, as the euro zone debt crisis intensified and wrangling over the U.S. debt ceiling continued.

The research firm said commodity funds, including physical commodity funds, those holding futures contracts, and those investing in the equities of commodity companies such as miners, attracted $1.465 billion in assets in the first two weeks of July.

The bulk of the net inflows came in the second week of July as investors sought the safe haven of gold and precious metals as the euro zone crisis intensified. The flows coincided with a warning from S&P that the U.S. credit rating might be downgraded if an agreement on its debt ceiling was not reached.

This was the largest cumulative flow as a percentage of fund group assets of all the sectors -- beating bonds, equities and money market funds, EPFR said.

"The 3 percent plus portfolio gain posted by this fund group stood out in a week when all the other 17 major equity and sector fund groups tracked by EPFR Global lost ground," the research group told Reuters.

EPFR Global tracks both traditional and alternative funds domiciled globally with $15 trillion in total assets.

Asset managers have attributed the switch to investors seeking a safe haven away from the storms in the bond and equity markets.

Guy Monson, managing partner at Sarasin, said it was a hedge against political breakdown in the United States and Europe given the debt crises.

"With that background, the bears are seeing the risks for the euro and the dollar, and saying: 'Let's go to gold'," Monson said. (Editing by Christopher Johnson)

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