Big investors are buying commodities amid the exodus
CCommodities have been one of the high-flying assets to start 2022 amid rampant inflation fears, but prices are starting to get back to earth. While smaller investors may be headed for the exits, large investors are coming to buy commodities.
The inflation narrative could unravel after the consumer price index (CPI) rose less-than-expected in July. At the same time, there has been a mass exodus of commodity exchange-traded products (ETPs), but is the outflow too soon too much?
“Investors pulled record amounts from commodity exchange-traded products (ETPs) in July, but industry watchers said the rush to exit ignored some long-term factors,” the Financial Times reported.
“Some $11.2 billion was withdrawn from commodity ETPs globally, beating the combined outflows of $9.7 billion recorded in May and June and marking the third straight month of net outflows, according to BlackRock data,” the report added added. “The previous record was set in April 2013 when investors withdrew $9.5 billion.”
Large investors now saw this as an opportunity. Even as the inflation narrative begins to turn into recession fears, commodities will likely always be in demand, and large investors are feeling the same.
“When it comes to raw materials, you always have two views. Someone will go short and someone will go long. Right now, institutional investors are increasing their capital allocation to commodities,” said Alessandro Sanos, global director of sales strategy and execution at Refinitiv, in the Financial Times report.
Commodity ETFs to play with
For retail investors, this could be a good time to get exposure to commodities at a good price. For investors looking for exposure to commodity ETFs, the abrdn Standard Bloomberg All Commodity Strategy K-1 Free ETF (BCI) could be a prime alternative.
BCI seeks total return that is designed to outperform the Bloomberg Commodity IndexSM, which is calculated on an excess return basis – the first of its kind since its inception in Q1 2017. BCI is actively managed, bringing momentum to investors Gains exposure to the commodity market and seeks a total return designed to outperform the Index.
With a net expense ratio of 25 basis points, BCI also offers a cost-effective solution to give investors exposure to commodities. Additionally, no K-1 tax documents are issued, which is a requirement for investing in partnership equity.
For more news, information and strategy, visit the Commodities Channel.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.