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Institutional investors are employing a greater range of sophisticated strategies in their commodities investments, according to a survey of more than 200 attendees at Barclays Capital’s fourth annual US Commodities Investor Conference here this week.

Nearly three-quarters of those surveyed indicated that currently they are utilizing either active strategies – managing long and short positions in a variety of commodities – or a combination of long and short index, active strategies, and structured commodity products. An even larger majority responded that over the next three years they would focus on this combination of strategies along with active management.

"Despite the volatile markets and falling commodity prices of recent months, institutional investors are committed to increasing the sophistication of their commodity investment strategies,” said Joe Gold, Co-Head of Commodities at Barclays Capital. “Our clients still value the diversification that commodities provide relative to other assets, while also seeing the potential for alpha generation that comes with a more advanced strategy.”

Approximately half of all respondents indicated that 5% or more of their portfolio is in commodities today, while fully three-quarters expect to invest above the 5% level over the next three years.

Even with the current global economic focus on deflationary trends, more investors than last year indicated that inflation-hedging characteristics are the most attractive aspect of commodities investment. Portfolio diversification remains the most attractive aspect for many investors, but less so relative to 2007 responses.

Energy is the commodity sector where institutional investors expected to see the highest returns in 2009, according to nearly 40% of respondents, followed by agriculture and industrial metals. Along with the expected high returns in energy, more than 80% of respondents expected the price of oil to average $75/barrel or more over the next five years.

Asked of their greatest current concern about investing in commodities, the largest portion of respondents chose a slowdown in emerging markets. This fundamental macroeconomic factor carried greater weight with investors than concerns over liquidity or regulatory changes.

The electronic audience response survey was conducted live during the conference, which brought together Barclays Capital experts in oil, power & natural gas, metals, agriculture and environmental markets with institutional investors including asset managers, banks, endowments, hedge funds, insurance companies and pension funds.

About Barclays Capital
Barclays Capital is the investment banking division of Barclays Bank PLC. With a distinctive business model, Barclays Capital provides large corporate, government and institutional clients with a comprehensive set of solutions to their strategic advisory, financing and risk management needs. Barclays Capital has offices around the world, employs over 20,000 people and has the global reach, advisory services and distribution power to meet the needs of issuers and investors worldwide. For further information about Barclays Capital, please visit our website www.barclayscapital.com.

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