[SINGAPORE] Reports pointing to the death of commodities as an investment class appear wildly exaggerated.

In fact, despite the doom-and-gloom headlines, the sector seems set to provide investors the benefit of diversification, industry observers say.

The Financial Times and Wall Street Journal reported last month that institutional investors such as pension funds, insurers and hedge funds have pulled large sums of money from commodities following the sector's worst annual performance in more than a decade. Barclays data showed nearly US$10 billion in outflows from commodity indexes.

In the week up to Feb 26, hedge funds and other speculators also reduced net-long positions - which bet on the rise in prices of commodities - by 16 per cent to 447,106 contracts, the lowest since March 2009, according to data by the US Commodity Futures Trading Commission.