Nov. 12 (Bloomberg) -- Calyon, the investment-banking arm of Credit Agricole SA, is expanding its commodities group and may introduce exchange-traded funds as investor demand for raw materials strengthens. The commodities team has 70 so-called front office workers, which includes traders, analysts and sales people, said Martin Fraenkel, global head of commodities. He didn’t say how many the bank would hire. A venture with EDF Trading Ltd., which started this month, is adding 12 people by the end of the year, he said. “We look to grow the business in all areas next year,” Fraenkel said in an interview in London yesterday. The S&P GSCI Index of 24 raw materials rose 47 percent this year, spurring investors to allocate more to commodities. Hedge funds and other speculators boosted their “net-long” position, or bets on higher U.S. commodity futures prices, to the most since July 2008. Exchange-traded products attracted $27.4 billion this year, Barclays Capital said Nov. 4. “There is an interest across the range of commodities,” Fraenkel said, referring to ETFs. “Logistically, physically backed precious metals ETFs are much easier to arrange.” Gold in 16 exchange-traded products tracked by Barclays Capital jumped 47 percent to 56 million ounces this year. That’s more than the official reserves of Switzerland and Japan. Silver holding in ETPs monitored by Barclays rose 34 percent to a record 357 million ounces, equal to more than half of global annual mine production. Credit Suisse started gold ETFs last month and said industrial metals will be the “next step.” Commodities Financing Calyon provides commodities financing and hedging to producers, consumers and traders. It also has hedge-fund and other investor clients and will start providing access to existing commodity indexes by the end of this year, said Fraenkel, who began metals trading at Philipp Brothers in New York in 1984. Calyon’s venture with EDF Trading covers coal and European natural gas and power. Credit Agricole, France’s largest bank by branches, said yesterday that nine-month revenue in fixed income, which includes commodities, was 2.03 billion euros ($3.03 billion), 68 percent more than a year earlier. The rebound in commodity prices and improving credit availability are making it easier for producers to secure financing, Fraenkel said. Consumers bought commodity futures in the first half of the year to lock in prices and are now buying less after the rally, he said. “Normally we would expect consumers to be locking in budgets for the upcoming year for 2010 in the fourth quarter of 2009,” Fraenkel said. “Consumers are rather nervous about whether prices are going to be sustainable or not in 2010.” Fraenkel, 49, joined Calyon from Dresdner Kleinwort, where he headed the global commodities team. He also worked at NM Rothschild & Sons Ltd. and JPMorgan Chase & Co. To contact the reporter responsible for this story: Chanyaporn Chanjaroen in London at cchanjaroen@bloomberg.net

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