Commodity ETFs See an Influx of Investor Money

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Includes: DBA, DBB
by: Tom Lydon

Two new reports are showing that commodity markets are consolidating and recovering, and ETFs have made investment in this sector much easier and more attractive.

Investor money appears to be flowing back into commodities because of the rising prices, or projected rising prices, and an increasing investor appetite for risk, reports Shashank Shekhar for Business 24/7.

The Merrill Lynch and Standard Chartered Reports found that while the markets were flat in June, commodities were attracting new money. Their estimates show that money invested in commodity indexes is up to $125 billion, from $80 billion in February.

Other findings in the reports include:

  • Grain prices have been in a downtrend as the market loses its weather premium
  • Star performers in agriculture have been sugar and soybeans, both of which can be found in the PowerShares DB Agriculture (NYSE:DBA)
  • More speculation could benefit the commodity markets, and ETFs make life easier for those who want commodity exposure

The advent of the ETF, along with Morningstar’s addition of six new commodity categories, four sector categories and one broad commodity asset class to its classification system are all having a hand in drumming up more interest in the commodity sector.

The new categories are intended for investors to evaluate and compare funds, as well as a reflection of the growth within the industry, reports Sue Asci for Investment News. Both agriculture and industrial metals categories have grown since the popularity of their respective ETFs.