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Barclays: Investors Shift to Commodities
© 2006 The Associated Press
NEW YORK — Investors are
increasingly turning to commodities to diversify their portfolios as the methods available to gain exposure to the market get more creative, according to an investor survey by Barclays Capital released Tuesday.
Barclays' second-annual commodities investor survey showed marked changes, over the course of one year, in the way investors view the commodities market and its role in their portfolios.
The survey of the investment bank's clients took place at two conferences each year in 2005 and 2006, one in Barcelona, Spain, and another in New York. Survey participants included large pension funds, retail distributors and _ carrying particular weight in New York _ hedge funds.
Investors are making "a very clear shift into having at least some commodities," said Kamal Naqvi, Barclays Capital director of commodities sales.
About 50 percent of survey respondents in Europe said their portfolios contained no commodities exposure in 2004 and 2005. When asked what percentage of their portfolio would be made up of commodities over the next three years, the number saying "zero" dropped to just 7 percent.
New York respondents indicated a significant shift into commodities, with more than 50 percent saying they'd seek to make commodities more than a tenth of their total portfolio.
The term "commodities" covers most raw materials, including precious metals such as gold, crude oil, industrial metals like copper, agricultural products and others. Aside from actual trading of physical commodities, investors often get exposure to the sector through index funds, which track the movement of a given basket of commodities without purchasing the physical asset.
However, investors are increasingly shifting their funds from passive, long-only indexes into a mixture of passive and active management and into structured commodity products, according to the survey. Those products could include one that follows Chinese demand for industrial metals or others structured more like equity investments, with a fixed-income payout.
There has been a "broadening out in the way investors can get exposure to commodities," said Barclays research analyst Kevin Norrish.
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