Investors expect to increase commodity investments over the next 12 months, even though short-term uncertainty is keeping them on the sidelines for now, according to a new survey by Credit Suisse.
Credit Suisse conducted the survey as part of its inaugural 2011 New York City Commodities Day on Tuesday, June 28, with a gathering of nearly 400 clients covering a wide cross section of institutional investors, retail distributors, mutual funds and hedge funds.
The survey found that 36% of investors classified themselves as currently “underweight” in commodities, with a further 10% having zero exposure. However, when asked about their expected investment level over the next 12 months, 40% expected to become “overweight” commodities and only 3% as still having zero exposure.
Two-thirds ( 65%) of respondents believe that commodities prices in 12 months will be around current levels or higher, with roughly half of those expecting prices to be at least 10% higher. That compares with only 13% that expect prices to be at least 10% lower, but a significant proportion (23%) admitted to having “no idea”.
Despite the recent moderation in oil prices, investors remain bullish on crude oil, with 76% believing that the oil price has yet to peak. Dismissing a dominant role of market speculation in determining oil prices, 72% said they believe energy prices are primarily driven by market fundamentals. Copper remains the favorite base metal, with 59% seeing it has having the best 12-month outlook of the group. However, the price path for commodities is expected to remain challenging, with 55% expecting realized price volatility to increase over the next 12 months.
The survey also examined the trend away from broad market benchmarks into more specialized products for commodity exposures. 45% of respondents said they view commodity ETFs as likely to receive the greatest asset flow, while 40% saw active indices and fundamentally based directional trading as the key growth areas. In comparison, only 5% said beta benchmarks will be growth products within commodities. In a separate question about Dodd-Frank regulatory changes, 74% said they expect no significant impact on their commodities investment activities.
“Overall sentiment towards commodities as an asset class is constructive, but investors are under allocated due to concerns about short term direction and volatility,” said Oscar Bleetstein, Head of Commodity Investor Sales for the Americas at Credit Suisse. “However, the survey confirmed our views that if and when confidence starts to return, investors are likely to increase exposure significantly and find managers or products that can accommodate this new environment.”
Credit Suisse AG is one of the world’s leading financial services providers and is part of the Credit Suisse group of companies (referred to here as ‘Credit Suisse’). As an integrated bank, Credit Suisse offers clients its combined expertise in the areas of private banking, investment banking and asset management. Credit Suisse provides advisory services, comprehensive solutions and innovative products to companies, institutional clients and high-net-worth private clients globally, as well as to retail clients in Switzerland. Credit Suisse is headquartered in Zurich and operates in over 50 countries worldwide. The group employs approximately 50,100 people. The registered shares (CSGN) of Credit Suisse’s parent company, Credit Suisse Group AG, are listed in Switzerland and, in the form of American Depositary Shares (CS), in New York. Further information about Credit Suisse can be found at www.credit-suisse.com.
In its Investment Banking business, Credit Suisse offers securities products and financial advisory services to users and suppliers of capital around the world. Operating in 57 locations across 30 countries, Credit Suisse is active across the full spectrum of financial services products including debt and equity underwriting, sales and trading, mergers and acquisitions, investment research, and correspondent and prime brokerage services.
In its Asset Management business, Credit Suisse offers products across a broad spectrum of investment classes, including hedge funds, credit, index, real estate, commodities and private equity products, as well as multi-asset class solutions, which include equities and fixed income products. Credit Suisse’s Asset Management business manages portfolios, mutual funds and other investment vehicles for a broad spectrum of clients ranging from governments, institutions and corporations to private individuals. With offices focused on asset management in 19 countries, Credit Suisse’s Asset Management business is operated as a globally integrated network to deliver the bank’s best investment ideas and capabilities to clients around the world.
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