Exchange-traded commodities are open-ended securities which trade on regulated exchanges, enabling investors to gain exposure to both commodities and currencies without trading futures or taking physical delivery.

Gold commodity ETPs remain the biggest single commodity sub-segment, but gold is slipping as the most invested commodity--now at 57% of the exchange-traded commodity market share, from 67% in 2008--as commodity ETP investors are turning to non-precious metals, Deutsche Bank's research department said in a report entitled "The race for assets in the European commodity exchange-traded products space."

"The big winners [in terms of attracting assets] in 2010 will be industrial metals and indices tracking the broad market, while Swiss funds tracking gold will continue to grow," Deutsche said. "In terms of trading, energy will remain a highly popular sub-sector, especially in light of a number of energy-leveraged products being launched."

Overall growth of exchange-traded commodities will slow this year from 145% growth in 2009, due largely to 2008 and 2009 representing the commodities space reaching critical mass, making further growth harder to achieve, the bank said. It added, however, that growth would remain healthy, estimated at between 60% and 90% in the European commodity ETP space for 2010.

Precious metals flows are likely to slow as these have now reached a fairly significant size, the bank said.

"In addition, with the decrease of volatility in the equity markets, some gold flows are likely to be directed back to equity. The first two months of 2010 saw net outflows from UK-based gold C-ETPs and net inflows for Swiss-based gold C-ETPs," it added.

Last year saw saw net inflows in all six commodity sectors--agriculture, broad indices, energy, industrial metals, livestock and precious metals--totaling Eur9.7 billion ($13.4 billion), or an average of Eur800 million/month, the report said.

Commodity ETPs saw Eur631 million of net inflows for the first two months of 2010, with outflows of Eur32 million in agriculture and Eur67 million in energy, primarily driven from Brent Oil (Eur31 million) and WTI (Eur21 million), it added; 2010 average monthly net inflows stand at Eur316 million, 25% lower than the respective number for 2009.

"Given the busy product launch calendar we expect inflows to pick up over the second and third quarter of 2010," the report said. "As more long and short products become available on a number of the dominant C-ETP sectors (short precious metals, oil, agriculture), these products will increasingly find a home with institutional investors and active value traders looking for value as the year progresses."

--Andy Blamey, andy_blamey@platts.com