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ETF Securities’ assets rise to all-time high of USD15bn

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ETF Securities’ assets under management have surged to an all-time high of USD15bn on the back of investor interest in hard assets as deteriorating government finances and aggressive quantitative easing policies raise concerns about the outlook for major currencies and medium-term inflation risks. 

AUM has increased by USD7.9bn this year, with 78 per cent of the increase driven by investor inflows, as ETF Securities expanded its geographical coverage with precious metals ETCs listings on the New York and the Tokyo Stock Exchanges.

Demand for physically-backed precious metal ETCs has been a key factor behind the rise, with ETF Securities’ physically-backed gold and palladium ETC holdings seeing new all time highs and platinum holdings hitting a high for the year. Inflows into ETFS’ gold ETCs have been particularly strong, with ETFS Physical Gold and Gold Bullion Securities seeing a USD97m increase on the week, bringing ETFS’ total gold holdings to a new record of 8.4mn ounces (USD8.4bn), up 39 per cent since the beginning of the year.

Flows into the gold ETCs have shown low sensitivity to downward movements in the gold price highlighting that the largest buyers of gold ETCs are institutional investors buying the metal as a long-term hedge against inflation, US dollar depreciation and other risks, rather than as short term trading instruments. The signal ETC holdings are sending is that most large investors’ believe these risks may continue to rise.

ETFS Physical Platinum holdings hit their highest level this year on 25 September, rising to 360,949 ounces, equivalent to USD467m on current prices. Demand for ETFS Physical Platinum and ETFS Physical Palladium have risen sharply from their lows of last year, with holdings up 111 per cent and 219 per cent respectively since the beginning of the year. 

The popularity of ETCs has not been limited to precious metals. AUM in ETCs tracking the DJ-UBS Commodity indices now stands at USD4.5bn, up 251 per cent since the end of 2008. Natural gas ETCs have seen over USD1bn inflows this year, driving natural gas ETC AUM to a record USD1.3bn as the DJ-UBS Natural Gas Sub-Index has rallied sharply over the past four weeks (up 35 per cent).

Agriculture ETCs have also seen strong investor interest with total assets in agriculture ETCs rising to USD1.4bn, up 134 per cent this year. Expected supportive long-term price fundamentals and potential near-term supply disruptions from a possible El Nino weather event later this year also appear to be playing a role in driving investor flows.

The ETFX equity ETF platform has seen strong trading growth since the introduction of thematic ETFs in fourth quarter of 2008, and 2x short and 2x leveraged equity ETFs at the end of the June quarter 2009. Basic resource themed ETFs have seen particularly strong returns, led by a 111 per cent increase in the ETFX Russell Global Coal Mining Fund and an 89 per cent rise in the ETFX Dow Jones Stoxx 600 Basic Resources Fund YTD. ETFX Funds now have over USD200m AUM, up 100 per cent in the past two months.

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