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Commodities outperform equities by 40%
during first half 2008
02/07/08
- Commodities were again the top performing asset class during the quarter, outperforming equities by 40% in 6 months
- Commodities outperform equities 4:1 over the past 10 years
- ETFS All Commodities up 15.6% during 2Q08 and 26.8%
during 1H08
- 16 ETCs show performance above 50% for first 6 months of 2008
- Energy ETCs top performers in 2Q08 with ETFS Natural Gas up 29.5% in 2Q08 and 72.7% in 1H08
- ETF Securities' assets surge through $6 billion on the back of gold, platinum and agriculture demand
ETF Securities' end of first half results for 2008 (1H08) show that commodities were once again the top performing asset class. The ETFS All Commodities DJ-AIGCISM ETC returned 15.6% during 2Q08 and 26.8% 1H08. With the slow down in the United States and the sub-prime crisis continuing to affect markets, equities and real estate were the again the worst performing asset classes for the second quarter in a row. For 1H08, the S&P500 index returned -11.9%, the DJ EuroStoxx50 returned -15.6% and the FTSE100 returned -10.5%. Therefore, the ETFS All Commodities ETC outperformed equities by approximately +40% over the first six months of 2008.
As a result of commodities' outperformance and also due the continued upheaval in world equity and credit markets, ETF Securities assets under management (AUM) ballooned by approximately 152% to $6.3 billion during 1H08.
Of the 37 commodities and baskets of commodities which ETF Securities provides exposure to, ETFS Natural Gas was the best performing commodity during 1H08 showing a return of 72.7% over the half. Sixteen types of ETCs showed performance above 50% during 1H08 including: ETFS Natural Gas, ETFS Brent Oil, ETFS Corn and ETFS Energy. Only a few commodities showed negative performance with ETFS Lean Hogs, ETS Zinc and ETFS Nickel showing the worst performance.
In addition to its 1H08 performance, commodities have also shown that they can outperform over the long term. Commodities were the top performing asset class in five of the past ten years. During this time, real estate was the top performer 30% of the time, bonds 10%, equities 10% and hedge funds 0% of the time. Over the past ten years, commodities have outperformed equities by approximately 4:1. The DJ-AIG Commodities IndexSM returned approximately 12.8% p.a. over ten years compared to 3.4% p.a. for the MSCI world equity index. The newly launched The DJ-AIG 3 Month Forward Commodities IndexSM would have performed even better with a 19.6% p.a. return over the past ten years.
These results show that asset allocation is an important determinant of portfolio performance and why it is important to have a diversified portfolio. Diversification is even more important as 1H08 showed that returns within equities are becoming more correlated with a different range of indices and strategies all being highly correlated. This included US equities, UK equities, world equities, large-cap, small-cap, growth and value which have all showed negative returns over the past six months. This increased correlation has resulted from two major causes; global financial and real economy integration has increased over the past ten years, and many markets tend to move together during volatile or stressed markets such as the one we are currently experiencing.
The following show the returns during 1H08 for various commodity baskets:
| ETFS Energy DJ-AIGCISM |
53.7% |
| ETFS All Commodities DJ-AIGCISM |
26.8% |
| ETFS Physical PM Basket |
19.5% |
| ETFS Agriculture DJ-AIGCISM |
18.9% |
| ETFS Industrial Metals DJ-AIGCISM |
14.3% |
| ETFS Livestock DJ-AIGCISM |
-7.9% |
Increased demand has occurred across all commodity sectors. During 1H08, precious metal ETCs added $1.6 billion (or 138%), with ETFS Physical Gold and ETFS Physical Platinum adding $1.3 billion between them. Agriculture ETCs added $1.2 billion (or 131%) with ETFS Agriculture and ETFS Forward Agriculture adding $807 million. However, Livestock ETCs were the surprise of 1H08, adding $238 million (an 1080% increase) which was spread evenly across livestock, lean hogs and live cattle.
In total, ETF Securities now offer platforms of physically backed precious metal ETCs and Classic, Forward, Short and Leveraged ETCs providing exposure to energy, agriculture, livestock, industrial metals and precious metals. The ETCs have been listed on five major European stock exchanges in dedicated ETC trading segments.
Commenting on the quarterly ETC performance figures, Nik Bienkowski, Chief Operating Officer, at ETF Securities, said:
"There has been a significant increase in demand for ETCs linked to the price of a wide range of commodities. Most recently, this demand has been for precious metal, agriculture and livestock ETCs as investors seek to diversify their portfolios away from equities, real estate and hedge funds and into other asset classes.
"Commodities have shown they outperformed in five of the past ten years with an average annual return of almost four times that of equities. In addition, their low correlation to other asset classes in times of financial stress also adds to the strong case for an allocation to commodities in a diversified portfolio.
"As a result of the current financial situation, investment characteristics and strong fundamentals over the past few years, ETF Securities has experienced phenomenal asset growth of nearly 152% during the first half to approximately $6.3 billion at the end of the 1H08."
For further information, please contact:
Roman Townsend
Penrose Financial
Tel: +44 (0) 20 7786 4875
ETF Securities continues its series of conference calls for finance
professionals:
Title: The Fundamentals of Livestock
Date: 3rd July
Time: 11:00am and 15:00pm London Time
Click here to register
www.etfsecurities.com/en/events/etfs_events_investor.asp
Notes to editors:
The management of ETF Securities Limited pioneered the development of Exchange Traded Commodities (ETCs), in 2003. Building on its success ETF Securities created the world's first entire ETC platform which was listed on the London Stock Exchange in September 2006. Since then, ETF Securities has listed its ETCs on Europe's major exchanges (Frankfurt, Paris, Amsterdam and Italy) with each exchange creating a separate ETC segment. With Classic, Forward, Short and Leveraged ETCs available, investors can execute most trading and investment strategies previously not possible.
To learn more about ETF Securities go to: www.etfsecurities.com
This press release does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for, any transferable securities to be issued by ETFS Commodity Securities Limited or any other securities, nor shall it or any part of it nor the fact of its distribution form part of or be relied on in connection with any contract or investment decision relating thereto. Any offer, invitation or solicitation shall be made solely by means of the prospectus and recipients of this advertisement who are considering a purchase of securities following distribution of the prospectus in connection therewith are reminded that any such purchase should be made solely on the basis of the information contained in such prospectus and any supplementary prospectus(es). This advertisement does not constitute any recommendation regarding the securities of ETFS Commodity Securities Limited.
The communication of this press release is not being made by, and this press release has not been approved by, an authorised person for the purposes of section 21 of the Financial Services and Markets Act 2000 (the "FSMA"). Accordingly this press release is not being distributed to, and must not be passed on to, the general public in the United Kingdom. The communication of this press release or any other document issued in connection with the offer and sale of the ETCs is only being made to and directed at those persons in the United Kingdom falling within the definition of Investment Professionals (as defined in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the "Order"), or high net worth entities, and other persons to whom it may otherwise lawfully be communicated, falling within Article 49(1) of the Order or any person to whom it may otherwise lawfully be made (all such persons together being referred to as "relevant persons"). The communication of this press release (or any other document issued in connection with the offer and sale of the ETCs) must not be acted upon or relied upon by persons who are not relevant persons. Persons distributing this press release must satisfy themselves that it is lawful to do so. All applicable provisions of the FSMA must be complied with in respect of anything done in relation to the ETCs in, from or otherwise involving the United Kingdom.
This is not an offer of securities for sale in the United States. Securities issued by Commodity Securities Limited (" Securities") have not been and will not be registered under the US Securities Act or any other applicable law of the United States. These Securities are being offered and sold only outside the United States to non-US persons in reliance on the exemption from registration provided by Regulation S of the US Securities Act. The Issuer has not been and does not intend to become registered as an investment company under the Investment Company Act and related rules. These Securities and any beneficial interest therein may not be reoffered, resold, pledged or otherwise transferred in the United States or to US persons. If the Issuer determines that any Security Holder is a Prohibited US Person (being a US Person who is not a "qualified purchaser" as defined in the Investment Company Act), the Issuer may redeem the Securities held by that Security Holder in accordance with the provisions described in the Prospectus. The Securities may not be purchased with plan assets of any "employee benefit plan" within the meaning of section 3(3) of the United States Employee Retirement Income Security Act of 1974, as amended ("ERISA"), any "plan" described in section 4975(e)(1) of the United States Internal Revenue Code of 1986, as amended (the "Code") or any entity whose underlying assets include "plan assets" of any of the foregoing by reason of an employee benefit plan's or other plan's investment in such entity, which employee benefit plan, plan or entity is subject to Title I of ERISA or section 4975 of the Code or any United States Federal, state, or local law or non-United States law that is substantially similar to the prohibited transaction provisions of section 406 of ERISA or section 4975 of the Code (any such employee benefit plan, plan or entity, a "Prohibited Benefit Plan Investor"). If the Issuer determines that any Security Holder is a Prohibited Benefit Plan Investor, the Issuer may redeem the Securities held by that Security Holder in accordance with the provisions described in the Prospectus relating to those Securities."
"Dow Jones," "AIG®" "Dow Jones-AIG Commodity IndexSM," "DJ-AIGCISM", "Dow Jones-AIG Commodity 3-Month Forward Index" are service marks of Dow Jones & Company, Inc. and American International Group, Inc. ("American International Group"), as the case may be, and will be licensed for use for certain purposes by ETF Securities Ltd. ETCs based on the DJ-AIGCISM or related sub-indices (including single commodity sub-indices) or 3-Month Forward Indexes are not sponsored, endorsed, sold or promoted by Dow Jones, AIG Financial Products Corp. ("AIG-FP"), American International Group, or any of their respective subsidiaries or affiliates, and none of Dow Jones, AIG-FP, American International Group, or any of their respective subsidiaries or affiliates, makes any representation regarding the advisability of investing in such product(s).
To obtain a copy of the prospectus please visit the website at www.etfsecurities.com
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