Sales of commodity-linked investments this year are set to break records, with the size of trades to date nearly four times that of last year according to data from Dealogic. There are 11 public deals already this quarter, compared to only four for the same quarter last year.
"There's been a shift in investor appetite. People want diversification," said Paige Orr, head of European commodity investor sales at Deutsche Bank in London. Commodities have a low correlation with traditional asset classes and are now being classed within the fashionable 'alternatives' sector, explained Orr. Deutsche Bank has worked on commodity-linked products for a full range of clients, from retail to high net-worth individuals. Popular products are similar to equity structured products, with a zero coupon bond and an option on a commodity index to give an investor capital protection and the growth of the index.
Officials say the growth of commodities as an asset class is more than just a fad. Tim Owens, head of currency and commodity solutions at JPMorgan in London, said, "It's here to stay." Commodities are now seen not just as a form of portfolio diversification, but as a type of disaster insurance, explained Owens. This is because precious metals and oil products, for example, tend to rise in value when the political environment is uncertain, he explained.
