UK pension funds to increase allocation to precious and industrial metals, says new study

Seventy-eight per cent of UK pension funds believe that markets have entered a commodity super cycle – a decades-long period during which commodities are predicted to trade above their long-term price trend. 

As a result, many expect to go overweight in commodities such as precious and industrial metals over the next 12 months.

That's according to new research by NTree International Ltd, a specialist marketing and distribution, and investor education firm. NTree represents Global Palladium Fund’s range of metals ETCs and China Post Global’s Market Access ETFs in Europe.

with reveals 78 per cent believe that markets have entered a commodity super cycle – a decades-long period during which commodities are predicted to trade above their long-term price trend.   

The study of 50 pension funds with a combined AUM of USD76 billion shows that over the next 12 months, 64 per cent of UK pension funds expect to go overweight in their allocation to gold, whilst 42 per cent expect to overweight silver.  In terms of industrial metals, Platinum Group Metals continue to be an area of interest for investors with 46 per cent of pension funds expecting to go overweight in platinum and 46 per cent expecting to increase their allocation to palladium. 

Base industrial metals are also starting to attract increasing interest with 40 per cent of funds looking to increase their allocation to the nickel whilst 46 per cent are also looking to overweight their exposure to copper.

The study showed that when asked what percentage of their exposure UK institutional pension funds should have to precious metals, 18 per cent said 3-5 per cent, and 66 per cent said between 5-7 per cent. For industrial metals, 44 per cent said their exposure should be 3-5 per cent, 24 per cent said between 5-7 per cent, and 24 per cent said 7-9 per cent.

The research shows that UK pension funds are also likely to increase their exposure to China, a key consumer of commodities and driver of global industrial production – with 44 per cent planning to increase their exposure to Chinese fixed income and 48 per cent to Chinese equities. 

Hamad Ebrahim, Head of Research at NTree, says: “There has been a great deal of speculation about whether or not we are in a commodities super cycle, but our research certainly seems to suggest that many pension funds believe that already.  As a result, they are proactively taking steps to increase their exposure to commodities such as precious and industrial metals which will participate and benefit from long-term economic growth.”

NTree represents Global Palladium Fund (GPF) which has four metal ETCs (gold, silver, palladium and platinum) listed on the Deutsche Börse and London Stock Exchange. They have the lowest charges with total expense ratios (TER) ranging from 0.145 per cent to 0.20 per cent. Targeting Family Offices, wealth managers, institutional and other professional investors, the new physically-backed gold, silver, platinum and palladium ETCs will track the spot price of the respective metals they cover.  

In an industry first, the ETCs use Blockchain technology to record bar information and provides an extra layer of security and transparency.

NTree also represents China Post Global, which promotes a family of innovative Exchange-Traded Funds (ETFs) providing access to commodities and emerging markets through its brand Market Access. Market Access ETFs combine intelligent index selection, optimal replication, transparency and liquidity. They are diversified investment solutions for investors across Europe who use Market Access ETFs to implement their investment strategy in the commodity and emerging markets space.

NTree has set up a dedicated brand, Metal.Digital as an education resource for professional investors with a focus on metals.