EPFR Debuts Commodities Flows Filters

Boston-based fund flows data provider EPFR Global has rolled out a series of thematic filtering tools that allow investors to break down commodity exchange-traded funds by different styles and underlying commodities, in response to increased demand for more granular data from clients.

"With all the craziness in the market, the biggest driver is interest in commodities -- gold, precious metals and even physical commodities -- and the way people typically get exposure is through ETFs, mainly physical commodity ETFs. In the past, pension funds would allocate maybe one or two percent to ‘alternatives,' but now we are seeing more use, and people diversifying beyond the bread-and-butter equity and fixed income funds," says Simon Ringrose, managing director of sales at EPFR. "So we have been getting demand from clients to analyze fund flows in and out of physical commodities... because while investors rushed into commodities in the first quarter, around half of that money has come out. So it is a very volatile asset class, and with that volatility, people want to look at the flows with a sharp lens."

Last month, the vendor made around 10 categories available via its web interface, which investors can compare with price data over time to identify inflection points, and can export the data into spreadsheets or trading models. The categories include bear funds that focus on short-only investments; leveraged funds; gold, silver and precious metals funds that focus on the physical commodities, mining stocks and related derivatives; agriculture funds focusing on agricultural commodities and companies linked to commodity production; and insurance funds, which can be used to exclude the effect of large purchases of equity and fixed income securities by insurance companies that distort the overall picture of funds flows.

"We've always had the data, but we had to ‘code up' the funds, because in the past we just referred to them as physical commodity funds. So we went back and went into more detail -- for instance, to isolate just gold funds," Ringrose says. "Ultimately, people are looking for predictive signals. Fund flows measure how many investors are lining up to buy a certain asset class, which can in turn drive up prices."

Ringrose says EPFR has so far seen most demand for data on gold funds, which investors are using to hedge inflation or currency exposure, but will continue to expand the range of filters to become more granular, adding that he expects to see demand for the ability to focus on funds relating to oil and natural gas, followed by index-based ETFs that provide more variation than basic bear or leveraged funds.

"People are looking at ETFs as more than just a straight play on an index, such as so-called active strategies like sector or country allocation strategies or the ability to play one index against another... to come up with empirical data for why they should move money from one country or sector to another," he says.