No end in sight for exodus out of commodity funds

New York

INVESTORS are bailing out of commodity funds at the fastest pace on record, and the exodus shows no signs of ending.

US exchange-traded funds linked to broad baskets of raw materials saw a net outflow of US$1.23 billion over the first three months of the year, the most of any quarter since the securities were created in 2006, data compiled by Bloomberg show.

Bank of America Corp (BOA) says ample supplies have unleashed price wars, and Goldman Sachs Group Inc predicts a 20 per cent drop for commodities already near a 13-year low. Morgan Stanley and Societe Generale SA also have cut forecasts for a whole range of items.

Rising supplies created bear markets over the past year as drillers unlocked more oil and natural gas, copper mines expanded and farmers harvested record corn and soyabean crops. The strongest US dollar in at least a decade encouraged countries with weaker currencies to export more. While the US economy is strengthening, Europe is still contending with its debt crisis and growth i…