Last year was a dismal one for commodities exchange traded funds, both from a performance and outflows perspective.
Although it fell just 2.2% for the year, the SPDR Gold Shares (NYSEArca: GLD), iShares Gold Trust (NYSEArca: IAU) and the ETFS Physical Swiss Gold Shares (NYSEArca: SGOL) each lost more than 2%. Frustrated by a lack of inflation and spurred by a soaring U.S. dollar, investors pulled $3.2 billion from GLD. That placed the world’s largest gold ETF on the 2014 top 10 list for largest outflows and now GLD is no longer among the ten largest ETFs. [Gold ETFs Want 2014 to End]
Gold and gold ETFs were not alone in their suffering. On a global basis, combined assets under management for commodities exchange traded products fell by $20.6 billion to $101.5 billion “as a strong US dollar and concerns about China and Europe growth knocked many commodity prices down towards their production costs,” according to ETF Securities.
Precious metals ETFs accounted for 70% of the asset departures from commodities ETFs last year, but there were exceptions to that rule. For example, on a global basis, palladium ETFs added $900 million in new assets, but in the U.S. investors pulled ETFS Physical Palladium Shares (NYSEArca: PALL).
Departures from PALL proved hasty because the fund’s 11.3% gain easily made it the best performing physically-backed precious metals in the U.S. last year. [Best and Worst Precious Metals ETFs]
Despite declines of nearly 20%, investors remained loyal to silver ETFs as the iShares Silver Trust (NYSEArca: SLV) and the ETFS Physical Silver Shares (NYSEArca: SIVR) saw 2014 inflows of $241.6 million and $15.3 million, respectively.
“Energy ETPs saw strong inflows in 2014, concentrated in the final three months as price declines of both crude and natural gas appeared exaggerated.Crude oil ETPs accounted for the lion’s share of inflows, while natural gas represented around 25% in 2014. However, these inflows were largely driven by US investors, who accounted for 85% of the global inflows. The entirety of inflows into natural gas came from US investors, as elevated inventory and mild weather forced prices to the lowest levels since 2012,” said ETF Securities.
With that, investors should remember that simply because money is flowing into energy ETFs, that does not mean all market participants have turned bullish on oil.
A valuable lesson taught by the United States Oil Fund (NYSEArca: USO) is that ETF’s often expanding shares outstanding counts when oil prices plunge. That was the case late last year, but much of USO’s asset expansion was attributable to traders shorting the ETF, which creates the appearance of new money flowing into the ETF because shares must go out on loan to the short sellers. [Bottom Fishing With Oil ETFs]
ETFS Physical Palladium Shares
Tom Lydon’s clients own shares of GLD.