The Hindu Business Line : `Investor interest in commodities rising'

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Mumbai Feb. 20 There is unlikely to be any softening in the pace of institutional investor flows into the commodity markets. Investors still value commodities for their portfolio diversification benefits, but are moving away from index investments and favouring more sophisticated approaches including active management and in particular structured products, according to Barclays Capital Research.

These are the key messages to emerge from a survey of 250 investors carried out by Barclays at the annual commodity investor conference at Barcelona last week.

Investor attitudes

The unique survey provides a valuable insight into the evolution of investor attitudes to commodities.

It shows that there has been a steady increase in investors with direct exposure to commodities. This trend is expected to continue with over 50 per cent of the audience expecting commodity investments to reach $120-150 billion by 2008 from a baseline of $100 billion.

More than half of those surveyed identified portfolio diversification as the most attractive aspect of investing in commodities, more important than absolute performance or inflation hedging.

Commodity prices

Current high commodity prices are the main concern of a large number of investors (40 per cent) and this is reflected in a move away from passive investment products with less than 5 per cent of the audience expecting to utilise this route, Barclays pointed out. Instead, they intend to target active management (just over 25 per cent) and structured products (almost 50 per cent).