Commodities ETFs bled more than $1.6 billion in assets in May,
as investors expressed their views that a decelerating global
economy doesn't bode well for aggregate demand moving forward.
Futures-based strategies were particularly vulnerable to the
investor exodus from an asset class they see as a big loser if the
global economy doesn't stabilize soon. That's because, unlike
equities-linked commodities ETFs, future-based strategies offer
more direct exposure to the prices of commodities themselves.
Funds like the $5.5 billion PowerShares DB Commodities Index
Tracking Fund (NYSEArca:DBC), a broad take on the commodities
space, lost some $170 million in assets in May, or nearly 3 percent
of its end-of-month assets, according to data compiled by
Meanwhile, the United States Commodity Index Fund
(NYSEArca:USCI) bled $5.8 million, worth 1.5 percent of its $387.7
million assets as of May 31.
A global economy where growth is in peril will hurt demand for
raw materials and goods. Europe's ongoing efforts to resolve the
indebtedness of Greece, Spain and Italy, as well as growing
concerns about growth in the U.S. and China's slowing demand, have
all tainted the outlook for consumption of everything from oil to
Regarding crude oil, nearby crude futures on the New York
Mercantile Exchange have dropped well below the $90/barrel level,
giving up more than 12 percent in value since the beginning of the
year. Natural gas prices are also under siege.
The PowerShares DB Oil Fund (NYSEArca:DBO), using a strategy
that owns different oil contracts along the NYMEX futures curve,
suffered outflows of $111.6 million-or more than a fifth of its
$513.9 million in assets at the end of May.
Commodities-Focused Firms Bore The Brunt
ETF providers that focus their products primarily on this asset
class saw the exodus firsthand.
VelocityShares, the exchange-traded note firm known for
volatility products that rolled out a roster of commodities-linked
strategies in February, including bull-and-bear pairs that tap into
energy and metals, saw its assets shrink by nearly 20 percent.
That earned VelocityShares the distinction of being the provider
with the biggest asset outflow in May in percentage terms.
Likewise, Teucrium Trading, the Santa Fe, N.M.-based fund
provider behind futures-based commodities ETFs such as the Teucrium
Agricultural Fund (NYSEArca:TAGS) and corn-, wheat- and
sugar-focused ETFs, gave up more than 16 percent of its total
assets under management in May.
Generally, equities-linked commodities ETFs fared a little
better. One fund in particular broke away from the herd and managed
to gather new assets rather than lose ground.
That was the FlexShares Morningstar Global Upstream Natural
Resources Index Fund (NYSEArca:GUNR), which attracted $49 million
in May even while the fund fell nearly 10 percent as it got caught
up in a market that overall fell more than 6 percent in May.
GUNR serves up exposure to global companies involved with
production and distribution of natural resources from agricultural
goods to energy to metals, timber and water.
FlexShares, Northern Trust's ETF unit, saw its total assets grow
12.6 percent in May to $854.9 million.
Unlike GUNR, other funds such as the Market Vectors Agribusiness
ETF (NYSEArca:MOO) and the Market Vectors-RVE Hard Assets Producers
ETF (NYSEArca:HAP) saw outflows of $36.8 million and $11.9 million,
respectively, in the last month.
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