The Hindu Business Line : Investors continue to bet on commodities

From record levels during early 2008, prices of major commodity groups covering energy, metals, polymers and agriculture have collapsed over the last six months. Would commodities be able to retain investor interest in this uncertain scenario?

Despite the recent challenging times across all asset classes, investors remain positive about commodities over the long-term, according to a survey Barclays Capital undertook recently.

The results are from over 250 of its institutional and hedge fund clients who participated in a commodity investor conference.

Of those surveyed in the conference, a third expect the average benchmark commodity index return over the next five years to be 5-10 per cent, with 35 per cent expecting over 10 per cent.

Meanwhile, 79 per cent plan to initiate or increase direct exposure to commodity markets over the next three years and three-fourths consider 6 per cent or more to be the appropriate weighting for commodities in a portfolio.

Gold, crude

Interestingly – even if unsurprisingly – investors expect gold and crude oil to be the two best performing commodities in 2009.

Grains too seem to engage investor interest.

Despite the recent volatility and price falls, the evidence from the survey is that investors still value the inclusion of commodities in their portfolio, primarily due to diversification benefits they offer, said Barclays Capital, adding investors are now employing a much greater range of strategies for investing in commodities.

More Stories on : Commodities | Investments | Commodity Markets

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