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ETF Securities gold equity fund up 90 per cent

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ETF Securities says it has seen strong outperformance in various recently-listed commodity-themed equity ETFs, Ucits III equity funds tracking companies in a range of global commodity s

ETF Securities says it has seen strong outperformance in various recently-listed commodity-themed equity ETFs, Ucits III equity funds tracking companies in a range of global commodity sectors including coal, shipping and agri-business.

The new ETF platform offers exposure to a range of thematic global commodity sectors and has taken in approximately USD30m since its launch, in addition to almost USD9bn invested through the firm’s exchange traded commodities.
 
The ETFS Russell Global Gold Fund, which tracks global gold mining companies, has been the best performing ETF, rising by 90 per cent since 28 October 2008. This compares to a 22 per cent rise in the gold price over the same period.

ETF Securities says gold companies have benefited from investors’ increasingly bullish view on the gold price, with gold companies providing leverage on further gold price gains. Even after recent increases, global gold companies are still trading at a discount to their levels versus the gold price.
 
Agriculture-related equities have also performed strongly with the ETFS S-Net ITG Global Agri Business Fund – which tracks the returns of globally listed companies involved in agriculture – up 18 per cent since 5 December. The company says investors appear to be attracted by agriculture’s defensive nature – agricultural prices tend to have a low correlation to the business cycle – and the agriculture sector’s relatively strong supply-demand fundamentals.
 
On 4 February the Baltic Dry Index rose by a record 15 per cent in one day. It has been reported that the number of idle capesize ships fell to almost zero after being around 25 per cent a couple of months ago. The ETFS Russell Global Shipping Fund shows a high positive correlation to the Baltic Dry Index. However the Baltic Dry Index is up 70 per cent over the past month, while the ETFS Russell Global Shipping Fund is down ten per cent as a result of the recent pressure on global equities.
 
A number of other ETFs exposed to growth themes also performed well last week, indicating that investors may see value in current valuations. The ETFS Russell Global Coal Fund was up over seven per cent last week while the ETFS Russell Global Steel Large Cap Fund rose 6.5 per cent.
 
ETFs tracking the broad US equity market, the ETFS Russell 1000 Fund and ETFS Russell 2000 Fund also saw a rebound last week, rising by 1.1 per cent and 0.7 per cent respectively. Historically the Russell 2000 – which provides exposure to US small cap equities – has seen the strongest returns versus major US equity markets indices when the business cycle turns up while the Russell 1000 – which tracks 90 per cent of US large cap equities – tends to relatively outperform during downturns.
 
Nicholas Brooks, head of research and investment strategy at ETF Securities, says: ‘Commodity-related equity ETFs have seen extremely strong performance recently as investors have increasingly focused on longer term fundamentals supporting commodity prices after extreme drops in the share prices of mining companies.

‘The ETFS Russell Global Gold Fund, which tracks global gold mining companies, has been the best performing ETF, rising 90 per cent since the 28 October 2008. Even at current levels, it is trading at a discount relative to its historic relationship with the gold price.
 
"Shipping equities may also provide good value following their very severe drop over the past eight months. The ETFS Russell Global Shipping Fund, which historically has had a high correlation to the Baltic Dry index, is down ten per cent over the past month while the Baltic Dry index has risen 70 per cent over the same period. Yesterday alone the Baltic Dry index rose 15 per cent, indicating that if this historical relationship holds there may be scope for a rebound in the Global Shipping Fund."

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