Investors look to energy as inflation creates discounts

energy commodities BofA Bank of America FE Analytics

23 March 2021
| By Jassmyn |
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Investors have poured into energy funds over the past month as the inflation theme has dominated markets, according to Bank of America (BofA).

BofA’s global research said inflation-sensitive sectors such as energy and materials were still trading at big discounts to history across a variety of metrics.

BofA data from its private clients founds energy exchange traded fund flows accounted for 36% of asset under management over the past four weeks. This was followed by bank loans, materials, financials, and Treasury inflation-protected securities (TIPS).

Last week, energy accounted for US$1.3 billion ($1.68 billion) in equity inflows, following tech ($3.2 billion), financials ($2.6 billion), and consumer ($2.2 billion).

 

 

BofA data also found that so far this year, commodities were the highest-returning sector at 20.2%, followed by S&P 500 (5.8%), real estate investment trusts (REITs) (5.2%), MSCI emerging markets (4%), and MSCI EAFE (3.8%).

According to FE Analytics, over the year to 28 February, 2021, the highest-returning energy and commodity fund was Terra Capital Natural Resources at 94.7%.

This was followed by ETFS Battery Tech and Lithium ETF at 66.23%), BT Classic Investment BT Natural Resources at 40.8%, BetaShares Australian Resources Sector ETF at 34.2%, and SSGA SPDR S&P ASX 200 Resources at 31.9%.

The commodity and energy sector, within the Australian Core Strategies universe, average return during this period was 23.37%.

Top-performing commodity and energy funds over the year to 28 February 2021

Source: FE Analytics

Over the longer-term, the top five best-performing funds were similar with the addition of Select Baker Steel Gold. The ETFS fund was launched in 2018.

The BetaShares fund came in in top spot with a return of 173.8% over the five years to 28 February, 2021.

While the Select Baker Steel fund rounded out the top performing funds during this time period at 138.4%, it had the highest volatility at 31.74.

This was compared to the sector average return of 74.29% and an average volatility of 13.51.

Top performing commodity and energy funds over the five years to 28 February 2021

Source: FE Analytics

 

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