New York, 10 December 2009 

Barcap: Even after a year of record commodity investment in 2009, institutional investors are prepared to increase investment in the asset class to new record levels in 2010, according to a survey of more than 300 attendees at Barclays Capital’s fifth annual US Commodities Investor Conference this week. 

Underscoring the record $60 billion invested in commodities in 2009 as estimated by Barclays Capital research, nearly 60% of survey respondents indicated they increased their commodity exposure over the past 12 months. And despite the sizable inflows this year, 63% of those surveyed indicated they plan to increase their commodity exposure over the next three years. 57% of respondents expect the level of commodity inflows in 2010 to be $60 billion or greater.

This strong affirmation of greater portfolio allocation to commodities comes even with investors’ tempered views on economic growth and benchmark commodity returns. 61% of respondents expect global GDP growth to be 3% or less in 2010. And three-quarters of those surveyed expect benchmark commodity returns to average 10% or less over the next five years.

While portfolio diversification still drives commodities allocation for many investors, 60% of respondents selected absolute returns as their motivation for commodity investment, more than double the previous year. This suggests a trend of increasing sophistication among commodity investors, and their desire for suitable alpha strategies.

"As our clients add to their commodities allocations and seek favourable absolute returns, the need to be astute in selecting investments is essential," said Joe Gold, Co-Head of Commodities at Barclays Capital. "To achieve this goal, investors must rely on high-quality research and closely follow market fundamentals."

When asked how they will be investing in commodities over the next year, 40% of respondents looked to third-party active management. Structured commodity products and long-short index strategies showed the largest gains in interest compared to last year, while interest has declined in long-only index investments.

Asked of their greatest current concern when investing in commodities, the largest portion of respondents chose a deterioration in fundamentals, while a significantly smaller portion chose the impact of regulation. Thus, while proposed regulatory changes are being closely watched by institutional investors, survey results indicate they are unlikely to deter the overall trend of increased allocation to this asset class.

The electronic audience response survey was conducted live during the conference, which brought together Barclays Capital experts in oil, power & natural gas, metals, agriculture and environmental markets with institutional investors including asset managers, banks, endowments, hedge funds, insurance companies and pension funds.

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