Institutional investing to drive commodity inflows

Net inflows to commodity-related investments should remain strong in 2011, with institutional investors poised to dominate that activity, according to a report by Barclays Capital.

Commodity investments stood at $376 billion as of Dec. 31, 2010, up from $270 billion the year before, helped by net inflows of $62 billion, the report said.

While those net inflows were down from a record $72 billion the year before, institutional investors accounted for an ever-greater portion of the total as the year progressed — with a record $8 billion in December alone, according to the report.

For the year, Barclays’ analysts estimated net institutional inflows of almost $46 billion, or almost three quarters of the total inflows.

“The return of the institutional investor, massive inflows into precious metals led by the desire to hedge against financial market risk, and the gradual shift towards active management of commodity strategies were among the key stories of the year,” the Barclays report said.

After a few years that saw retail investors accounting for the bulk of activity, “we expect institutional investors to continue to dominate the space,” the report said.