By Hal M. Bundrick
NEW YORK (
)--As the Fed signals a reduction of its bond-buying program, the effects are rippling through markets in virtually every asset class. The stock and bond markets have become even more volatile and finding a safe haven is elusive. Gold and other precious metals and commodities are no exception. According to Lipper, the Commodities Precious Metals (CMP) Funds classification suffered its twelfth consecutive week of net outflows for the period ending June 19. Assets under management for the group have fallen from a $103.7 billion apex at the top of the gold run on October 10, 2012, to $63.4 billion as of last week. That is the smallest allocation the group has seen since July 7, 2011.
Lipper defines CMP Funds as investing primarily in precious-metal commodity-linked derivative instruments or physicals.
This is a rapid reversal in precious metals holdings from 2012. Last year the asset class saw inflows of just under $9 billion -- while year to date some $19 billion has exited the space. Performance could clearly be the reason for the retreat. CMP Funds have lost nearly 13% for the one-year period ending June 19th.
Meanwhile the news is even worse for funds investing in precious metal miner, exploration, distribution and other underlying company stocks comprising the Precious Metals Equity Funds (AU) group, which has lost over 41% during the same one-year period. Assets under management for AU Funds have declined to $15.4 billion from $38.6 billion on September 7, 2011.
In a research statement, Tom Roseen, Head of Research Services with Lipper, notes the wide performance disparity between the two groups.
"For the one-year period just ended, the performance difference between the two groups was considerable (-41.33% for AU Funds versus -12.94% for CMP Funds)," Roseen writes. "While CMP fund returns are linked directly to underlying commodity prices, the returns for AU funds are linked to the profitability of the underlying firms in addition to the underlying prices of the commodities."
--Written by Hal M. Bundrick