May 9, 2013 / 3:30 PM / in 5 years

Commodity ETPs suffer record outflows in April-BlackRock

* Investors pull record $8.7 bln from gold ETPs
    * Copper ETPs shunned on Chinese growth fears
    * Wealth managers switching to equities, bonds

    By Claire Milhench
    LONDON, May 9 (Reuters) - Commodity-based exchange traded
products (ETPs) suffered record outflows of $9.3 billion in
April, data showed on Thursday, as institutional investors
dumped gold holdings.
    Leading wealth managers have been switching out of
commodities since the start of the year in favour of equities
and bonds as they look for yield, a trend which accelerated in
April with a major sell-off across the commodities field, led by
a collapse in the gold price. 
    Global outflows from commodity ETPs tripled month-on-month,
according to Blackrock Inc, the world's largest asset
manager, while redemptions from the precious metals segment
quadrupled after gold's largest spot-price decline in 30 years.
    Investors pulled $8.7 billion from gold ETPs globally,
Blackrock's data showed, after the yellow metal plunged to
$1,321.35 an ounce.
    Lower U.S. inflation expectations, a weak Chinese GDP report
and rumours of potential gold reserve sales by distressed
European countries such as Cyprus also contributed to investor
outflows, Dodd Kittsley, global head of ETP research at
BlackRock, said. 
    ETPs, whose value is linked to moves in their underlying
assets, are an easy route into commodities for investors. Gold
ETPs dominate the commodity sector, accounting for 66 percent of
the total $159 billion invested in commodity ETPs globally. 
    The previous record for outflows was set in February when
gold ETPs lost $5.7 billion and total commodity ETPs lost $5.2
billion. Outflows from gold ETPs now amount to $17.9 billion
year-to-date, with overall commodity outflows at $17.8 billion.
    Despite good demand for gold coins, bars and jewellery
following the price collapse, ETP investors remained net sellers
into May, which Ole Hansen, head of commodity strategy at Saxo
Bank, attributed to institutional accounts. 
    These make up about half of the investments in the SPDR Gold
Trust, the world's largest gold ETP, he said, which lost
$13.4 billion in the first four months of 2013. 
    Redemptions from industrial metals ETPs also increased, to
$113 million from $82 million in March. Kittsley said the
majority of these outflows were from copper ETPs, as benchmark
copper fell from $7,540 a tonne at the end of March to
$7,055 a tonne at the end of April. 
    Analysts cited renewed concerns about weaker growth in China
and the United States, rising copper inventories on the LME, and
new mine supply. 
    "Expectations of a surplus in copper this year because of
new supply coming online has caused some investors to cut their
positions," said Nicholas Brooks, head of research and
investment strategy at ETF Securities, an issuer of ETPs.
    Brooks said asset allocators were now in a transition phase.
"People haven't gone fully 'risk on' - they are going into
defensive (recession-proof) equities," he said. 
    "There's uncertainty about the sustainability of the U.S.
recovery and the debt problem in Europe. I'm not surprised
investors are being more cautious about their cyclical bets."
    At the end of April, BlackRock's data covered 928 commodity
ETPs worldwide, worth some $159 billion. The following table
shows global commodities ETPs at end-April (US$ mln):
 SECTOR                  FLOWS       ASSETS
 Broad                   -162        18,231
 Agriculture             -95         5,514
 Energy                  -89         8,010
 Industrial Metals       -113        2,287
 Gold                    -8,720      105,731
 Silver                  -76         14,159
 Other precious metals   1           5,101
 Precious metals total   -8,796      124,991
 TOTAL COMMODITIES       -9,255      159,034
    Source: BlackRock
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