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Nine of the 10 best-selling ETPs in Europe so far this year fall within broad-basket commodities funds and the industrial metals space, notes Cerulli Associates. It believes this transition is one of several factors pointing to a subtle change in the use of commodity-linked investments.

Manager and investor attention has shifted accordingly, says Fabrizio Zumbo, associate director, as commodities have historically done well in times of inflation.

Inflation concerns and related speculation about a possible supercycle in commodities have seen investors take notice. Several private banks operating in Europe told Cerulli that they have increased the allocation to precious metals or other commodities in their discretionary portfolios to help diversify and hedge against inflation.

In addition, many managers Cerulli interviewed said they see increased scrutiny of how commodities are extracted, grown, and used, in line with the growing attention to sustainability in the European asset and wealth management industry. A vast amount of global spending is needed to build clean energy infrastructure, such as electricity grids and electric vehicle charging stations. Demand for specialist metals is also expected to grow as part of the transition to a greener and more sustainable future. Power grid infrastructure, for example, needs copper, as does energy storage for industrial use. Lithium, meanwhile, is used in battery technology and nickel and copper are key components of electrification.

"Commodities still account for only 2.6% of the assets held in exchange-traded funds (ETFs), although many investors will have access indirectly through their equity-based holdings. Short-term bullishness around an economic recovery in concert with fears of inflation and a multi-decade shift in demand will ensure that commodities remain in the investment headlines," says Zumbo.