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Credit crisis results in record shattering day
for Exchange Traded Commodities
16/07/08
- Safe haven buying results in Gold ETC inflows of $265m
- Total net inflows of $355 million experienced across all ETCs,
including agriculture, industrial metals and precious metals
- Credit crisis helps Leveraged ETCs to increase by 400% in 11 weeks
- ETFS Leveraged Gold (LBUL) sees $82m inflows
- Two Gold ETCs in top 4 LSE traded ETCs/ETFs, trading $1.2 billion
in June 2008
ETF Securities Limited, the global pioneer of exchange traded commodities
(ETCs), saw record inflows in its Exchange Traded Commodities platform
yesterday. Inflows were experienced across a variety of commodities and ETCs
yesterday with precious metals, agriculture, industrial metals and Leveraged ETCs
making the largest contribution to yesterday’s record breaking day. Gold was the
most popular ETC yesterday but even ETFS Agriculture (AIGA) bucked a recent
trend by adding $50 million. Excluding the recent acquisition of Gold Bullion
Securities, ETF Securities’ total assets have grown by $1.7 billion or 30% in the
past 11 weeks to $6.6 billion, with the five physical precious metals contributing
more than 50% of inflows, to reach a record $2.7 billion.
Records for ETC inflows were shattered as investors have continued to seek
uncorrelated asset classes to equities. As equities continue to show volatility due
to the year long credit crisis, ETCs continue to outperform. ETCs have persisted
to show that their returns are uncorrelated to equity market returns, adding to
their appeal as investors shun equities while global equity markets plunge to
multi-year lows and credit markets reel on concerns of mounting losses.
Safe haven buying saw ETF Securities’ Precious Metals platform experience huge
demand, contributing 75% of net inflows yesterday. Approximately $265 million
equivalent of inflows were experienced in gold ETCs alone. Gold ETCs recorded
$225 million of trading on the London Stock Exchange (LSE) on the same day the
LSE issued a report showing that gold ETCs took two of the top four spots in
terms of trading volumes in June 2008 on the LSE’s ETC/ETF trading platform.
Gold ETCs traded $1.3 billion while the two physically-backed gold ETCs captured
most of this volume, trading $1.2 billion.
ETFS Short Crude Oil (SOIL), the second most traded ETC/ETF in London in June
2008 continues to break records, trading $800 million. ETFS Short Crude Oil
(SOIL) is again set to break consecutive monthly trading records in July as it has
already traded $750 million in the past 12 trading sessions on the LSE.
Leveraged ETCs are also proving popular as the credit crisis increases the cost of
credit while also making credit harder to obtain. ETFS Leveraged Gold (LBUL)
saw inflows of $82 million yesterday. The daily return on Leveraged ETCs is 2x
the daily % change in the underlying commodity index (excluding fees), meaning
yesterdays inflows into ETFS Leveraged Gold (LBUL) was equivalent of
$164 million, making this one of the largest trades ever for an ETC. As a result of
reduced liquidity in capital markets due to the credit crisis, Leveraged ETCs have
been the fastest growing type of ETC over the past 11 weeks. Leveraged ETCs
have grown by 400%, adding approximately $220 million to $270 million total
assets.
ETF Securities now offers more than 120 ETCs which give investors greater choice
to implement different investment strategies with the choice of physical, long,
forward, leveraged and short exposure to a wide range of commodity sectors.
ETCs are simple to access as they are traded in three currencies (Euros, USD and
Sterling) and listed on five major European Exchanges including the London Stock
Exchange, Euronext Paris, Euronext Amsterdam, Deutsche Borse and Borsa
Italiana. Each Exchange has created unique ETC trading segments resulting in
trading volumes exploding to $1.2 billion last week.
Commenting on the yesterday’s trading, Nik Bienkowski, Chief Operating
Officer, said:
“We are not surprised with yesterday’s news that commodities and more
specifically gold ETCs continue to shatter records for trading volumes and inflows.
ETCs have been designed to be accessible, efficient, liquid and low-cost products
for investors. Our platform approach to ETCs across Europe’s major Exchanges
allows any investor at any time to trade commodities in the same way they can
buy any equity.
“Commodities have been shown to have low correlation to equities. They have
also outperformed other asset classes when equity markets have been stressed.
As a result, independent studies show that commodities can benefit a diversified
portfolio even in the best of times. However there is no doubt that ETCs have
benefited from the current financial situation affecting global equity markets.
“The demand for Leveraged ETCs also shows that the current credit crisis is
making capital more expensive. Leveraged ETCs provide investors double the
daily exposure for less than 1% management fee. Comparing this to deposit
rates of over 7% in some cases, Leveraged ETCs are a cost effective way to gain
exposure to commodities. As a result, we experienced inflows of $82 million into
our ETFS Leveraged Gold (LBUL) ETC yesterday.”
For further information, please contact:
Roman Townsend
Penrose Financial
Tel: +44 (0) 20 7786 4875
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 subindices
(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, AIGFP,
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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