Commodity investments may rise by $30 billion to $40 billion this year as investors favor oil, gold and copper, Barclays Capital said.
The projected gain compares with an increase of $15 billion to $30 billion forecast in a Barclays survey of more than 100 institutional investors in Europe and the U.S. Assets in commodities climbed $15 billion last year, the least since 2002, to $399 billion, Barclays said.
“Investors expect to see a good, healthy year in terms of commodity inflows,” Kevin Norrish, an analyst at Barclays in London, said last week. “It's not going to be one of the strongest years ever, but it's going to be a strong recovery over 2011.”
Inflows were $67 billion in 2010, according to Barclays. Some 42 percent of respondents in the survey said they reduced commodity exposure last year because of “general risk aversion” and high correlation with other assets. A so-called hard landing in China, the largest user of everything from soybeans to copper, is the main risk for commodities, followed by the European debt crisis, according to the survey.
The Standard & Poor's GSCI Total Return Index of 24 raw materials fell 1.2 percent last year, the first decline since a 46 percent slump in 2008. The gauge is up 9.8 percent this year.
Thirty-one percent of investors polled by Barclays said U.S. natural gas will be the worst-performing commodity this year. The fuel has dropped 16 percent in New York trading in 2012, figures compiled by Bloomberg show. Grains will perform the worst, according to 14 percent.
Fifty-six percent of respondents plan to open or add to commodity investments over the next three years, while 34 percent intend to hold them at current levels, Barclays said. Thirty percent said their investments in commodities are 25 percent or less of targeted allocations, and a quarter said their exposure is above 75 percent of the planned amount.
Hedge funds and money managers boosted combined net-long positions across 18 U.S. futures and options by 7.3 percent to 1.03 million contracts in the week ended Feb. 21, Commodity Futures Trading Commission data show. That's the highest level since Sept. 13. Bullish wagers on gold climbed to a five-month high, and bets on crude oil rose to the most since May.
The dollar will likely strengthen against the euro while remaining weaker against emerging-market currencies, leaving demand for commodities unaffected, Norrish said.