Commodity funds in fee ‘bonanza’ as assets soar 46%


Commodity funds and ETFs have seen assets soar 46 per cent since the end of last year creating a bonanza for providers due to the high fees they charge on the niche products, Cerulli Associates analysis reveals.

Inflows are reaching the ‘highest level in years’ hitting €5bn year to date following €1.5bn inflows in July, Cerulli says.

Inflows are attributed to gold prices rising 19 per cent over the period, as well as unsettled markets.

Cerulli Associates managing director for Europe Barbara Wall says providers in the sector are facing a “bonanza” due to the high fees charged on products exacerbated by a lack of competition.

“Take into account the raft of closures in commodity funds, with very few opening, and there would appear to be a bonanza for the providers still in the sector,” says Barbara Wall.

“ETF Securities, for example, are still able to charge 50-60 basis points on some ETPs, at a time when total expense ratios for many standard equity and bond exchange-traded funds (ETFs) are in single digits.”

However, Wall warns that commodity funds still face competition from other asset classes.

“Providers of higher-cost products may want to think about how much longer they can retain investor loyalty in the face of such tough competition,” says Wall.

“AUM in commodity products is about 1 per cent of the total fund universe. Even if the latest recovery turns into a sustained bull run, investors’ appetite for such funds will never match that of the mainstream asset classes. For one thing, they tend to be much higher risk.”