So easy is it now to pick and choose your investment, it is no great surprise that asset allocators are showing willing to look to the world of passives for new ideas. However, it is not necessarily commodities that they are looking for.
Today’s ETP Landscape report from iShares owner BlackRock found that the ETP industry has recorded its best ever start to the year, attracting net new assets of $67.3bn (£42.5bn) in Q1. Impressive figures, especially when you consider that fixed income – usually the domain of active managers – accounted for almost $20bn of those inflows.
Providers are responding to this demand with more esoteric products. For example, fixed income giant Pimco recently announced its intention to launch its first European-listed ETF focused on the short-term high yield universe. High yield products from iShares and SPDR also feature in the top 10 ETPs ranked globally by year-to-date new net assets.
ETF investors like to talk commodities, but by that they usually mean gold. According to the latest note from ETC specialist, ETF Securities, gold accounts for just under two thirds of assets held across all commodities; and by all accounts investors are exiting the asset class in their droves this year.
Anecdotally, asset allocators appear keen to increase their exposure to alternatives, the problem is what alternatives? Gold is a great safe haven and currency hedge, but that story has arguably been over-played. The same goes for commodities in the energy and agriculture space, while their inherent volatility has put many investors off in the first place. At the other end of the scale there is property, though this too has failed to live up to expectations.
No wonder then, as the BlackRock report tells us, volatility ETPs are proving popular. The big question comes that, as with some of the new-fangled specialist equity and fixed income ETPs, do investors really understand how they work? But, that’s another topic entirely…