Barclays Capital on Monday said investment flows into commodities rebounded in the first quarter with $6.9 billion (4.3 billion pounds) of fresh inflows into the asset class, and total assets under management rose to an all-time high of $435 billion.
Exchange-traded products and structured notes led inflows, while index swaps again posted outflows.
The strength of the quarterly inflows masks a very large bias towards commodity ETPs ($7 billion) and structured notes ($1.4 billion). In contrast, index swaps saw $1.5 billion outflow over the quarter, the fourth consecutive quarter of outflow, Barclays said in note to clients.
Since the first quarter of 2011, index swaps have had cumulative outflows of $15.9 billion, though the pace of outflows moderated in the first quarter, Barclays said.
This is the first time in our history of commodity investment flow data to see such a long period of weakness in any form of investment product, the investment bank said.
As a result, the rebound seen in commodity investment flows in the first quarter remains fragile, it added.
For the first quarter, base metals received positive flows for the first time in a year and agriculture was the only commodity sector to see an outflow.
The $6.9 billion inflow in the first quarter masks a high degree of monthly flow volatility, Barclays said.
March saw $2.2 billion in outflows from commodities, the first outflow since December, mainly due to the weakness of index swaps.
In contrast, January and February were relatively strong with $2.9 billion and $6.2 billion in inflows, respectively, driven by the relative strength of inflows into ETPs.
All sectors except precious metals saw outflows in March. Given energy's relative large share in index swaps, energy-linked indexes saw $1.3 billion in outflows in March.
The volatility of flows in Q1 was a reflection of jittery market sentiment, investors' rather fickle mood, and the lack of any strong conviction among a number of institutional investors and hedge funds around price direction, Barclays said.
(Reporting by NR Sethuraman in Bangalore; Editing by Phil Berlowitz and Leslie Adler)