New futures-based industrial metals ETP on the books for Aberdeen Standard Investments
One of the world’s largest asset managers, Aberdeen Standard Investments, (ASI) with USD635 billion under management, also has its US based ETF business, comprising the former ETF Securities firm. This business was acquired in 2018 and three years later the assets in their suite of commodities and precious metals ETFs has risen by 180 per cent to close to USD7 billion in assets.
Steven Dunn, Head of ETFs at ASI explains that the firm’s products include the USD1.5 billion PPLT, the largest physically-backed platinum ETF in the world, and USD2.5 billion physically-backed gold fund, SGOL.
Talking about their rapid growth, Dunn says: “Sometimes you need the wind at your back and the sun on your shoulders and particularly through late 2019 and into 2020, and now into 2021, there has been a lot more recognition that in some of those markets which changed pretty rapidly, folks need alternatives, with low correlation. In those previous seven and a half years, the more equity you owned, the better off you were, but the global pandemic has changed things.”
Dunn comments that the ‘greenwash’ of 2021 has created much more awareness of not just ESG strategies but also government action as it brings in new programmes, particularly with the arrival of President Biden and his very different agenda from the previous incumbent.
“Some of these things are very supportive to the types of products that we offer,” Dunn says. “If Covid was the story of 2020, then inflation could be the story of 2021. And it’s an age-old story that you can try and fight inflation or you can try to participate and the you first see inflation in the commodities, such as copper or food or lumber. You want to be exposed to either companies that can pass on that additional cost or participate in broad based commodity products that are performing well.”
For Dunn, the debate that is currently running is about how much of the current inflation is due to Covid relief and so transitory, and how much is here to stay for quite some time.
ASI has seven ETFs in the commodities space: five owning the physical metal of gold, silver platinum and palladium and one that owns all four metals, and then two broad based commodity ETFs that invest through the futures market.
These last products have seen a lot of interest this year, Dunn says. “All the commodities have moved to the north from a performance standpoint and the laggard has been gold which hasn’t performed so well, and, despite a recent rally, remains slightly negative for the year, but it is influenced by other things that other commodities aren’t.”
By this, Dunn explains that gold doesn’t like interest rates backing up and the strength of the dollar.
“It’s a mix in the story because as inflation kicks in what gold likes is negative real rates so as inflation pushes higher gold will perform - the second half of the year could be more of a gold story,” he says.
New launches on the books include a filing to launch somewhat outside of the firm’s commodity footprint with a futures-based industrial metals product that will give exposure to copper, aluminium, nickel and zinc.
“We are already running those contracts anyway so it’s an extension product for us,” Dunn says. “The inflation theme is one that is being spoken about a lot and that debate is going to stick around a while. You can point to elements of both the pandemic put also supply constraints and it will be interesting to see how it plays out.”
The new green infrastructure also supports precious and industrial metals as all things with electrification at their heart use silver, and platinum is in electric vehicles and anything hydrogen oriented. “These very specific precious metals will be in high demand moving forward,” Dunn says.