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Thread: WSJ: A Wave of Buying Hits Commodity Funds

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    Default WSJ: A Wave of Buying Hits Commodity Funds

    JANUARY 12, 2009

    A Wave of Buying Hits Commodity Funds


    In recent weeks, commodity funds have seen an influx of several billion dollars, a stark reversal from the brutal forced selling that dominated the second half of last year.

    Most of the money has flowed into long-only vehicles -- funds that bet on prices to rise -- suggesting a combination of investors' revived confidence and portfolio rebalancing. This wave of fresh buying is partly behind the rally in some commodities that petered out a few days ago, and could bring more liquidity into the market. (Please see related article on C8.)

    "One thing that has changed significantly in recent weeks is the attitude of investors to commodity exposure," Barclays Capital said in a research note on Thursday.

    In December, investors poured $3.9 billion into commodity exchange-traded securities, or ETFs and ETNs, which held a total of $36.2 billion in assets as of the end of 2008, according to fund data tracker National Stock Exchange.

    Among commodities, oil and gold funds are among those seeing the most interest. Last month, the United States Oil Fund, the largest oil ETF, gained $2.06 billion in net assets, and $603 million went into SPDR Gold Shares, the largest gold ETF backed with the physical metal, over the same period, according to National Stock Exchange. A silver ETF, iShares Silver Trust, had a net inflow of $37 million.

    PIMCO Commodity Real Return Strategy fund, the largest commodity index fund with $6.2 billion in assets, says it has seen a consistent cash inflow every business day through Thursday since Dec. 15. The fund had been losing assets since last summer. Meanwhile, some hedge funds that survived last summer's carnage are looking to open new funds.

    Last edited by Slimprofits; 01-12-09 at 11:55 AM.

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