Exchange-traded commodity investments dominate structured products

Exchange-traded products (ETPs) continued to dominate structured products as the premier choice for commodity investment in Q1 2009, new research by Barclays Capital has shown. The assets under management (AUM) of ETPs, which includes both listed commodity funds and physically-backed investments, increased by an estimated US$19 billion from last quarter. This included new inflows of around $17 billion.

Issuance for structured products, by contrast, was at around $1.5 billion for Q1, which continued to be hit hard by contango curves in commodity markets, says Barcap. Contango curves occur when the future price of a commodity is higher than the spot price, which eats into returns as it costs investors an increasing amount to continually replace futures contract and maintain exposure, which is known as negative roll yield.

Commodity indexes also attracted $3 billion of inflows, but AUM fell $2