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Credit Suisse Client Survey: Investors are Underweight Commodities Amid Caution over Volatility, the European Crisis and Correlation with Other Assets

A new survey from Credit Suisse finds that a broad range of investors say they are currently underweight commodities, even though they expect to increase their allocations over the next 12 months.

Credit Suisse conducted the survey as part of its 2012 New York City Commodities Day on Tuesday, June 26, with a gathering of about 320 clients covering a wide cross section of institutional investors, distributors, mutual funds and hedge funds.

“While investment in Commodities continues to grow, in the near term most participants are exercising caution amid market volatility and large macro risks like we’re seeing in Europe,” said Oscar Bleetstein, Head of Americas Institutional Sales for Commodities at Credit Suisse. “Our annual Commodities Day event helps our clients to navigate this challenging environment by presenting insight from across the institutional divisions of Credit Suisse.”

The survey found that 41% of investors classified themselves as currently “underweight” commodities, with a further 4% having zero exposure. However, when asked about their expected investment level over the next 12 months, 50% expected to be “neutral” commodities and 27% expect to be “overweight.” In a related question, 36% expect commodities as an asset class (as measured by the Credit Suisse Commodities Benchmark, CSIXTR) to be at least 10% higher 12 months from now.

The largest groups of attendees at the conference described themselves as Institutional Investors (29.3%) and Family Offices/ Private Clients / Retail distributors (26.7%). When asked about their rationale for investing in commodities, 45.3% said their focus was on strategies that generate returns in excess of broad market benchmarks, or “alpha.”

The largest challenges for today’s commodity investors, according to the survey, are the potential for extreme volatility and high correlation with other asset classes such as equities and fixed income. However, 48.8% of those polled expect the correlation between commodities and equities to fall over the long term.

Some other results of the survey:

  • 66% of investors polled do not think we’ve seen the peak in crude oil prices 

  • 69% of investors feel that gold will be higher than $1,600/oz in 1 year 

  • 47% believe natural gas will be the best performing part of the energy sector in the next 12 months, followed by crude oil (28%), oil products (15%) and coal (10%) 

  • A relatively small 18% of participants believe that Dodd Frank will have a big impact on their business, with 48% saying the impact will be modest and 34% insignificant. 

  • The sub-sector with the best outlook was agriculture (38%), followed by precious metals (29%), energy (26%), and industrial metals (7%). 

For a complete set of the survey results, please contact Credit Suisse Media Relations at the number below.