(New throughout, adds U.S. producer prices in January)
By Jennifer Ablan
NEW YORK, Feb 15 (Reuters) - Financial advisors and smaller retail investors, wary that inflation may be brewing again, ratcheted up their bets on funds in Morningstar's Commodities Broad Basket fund category in January, the largest net inflow of cash since March 2011.
The commodities category attracted $1.9 billion last month, compared with negative outflow of $186 million in December and cash inflow of $319.5 million in November, according to Morningstar data. Inflation fears gained traction this week when the U.S. Labor Department reported rising consumer and producer prices in January.
"The 'deflationary and disinflationary mindset' has eroded. Getting out of that mindset is quite helpful to commodities," Jeffrey Sherman, deputy chief investment officer at DoubleLine, said about the multiyear decline in the broad commodities market which bottomed in January 2016.
The U.S. Consumer Price Index jumped 0.5 percent in January, well above expectations, the Labor Department said on Wednesday. On Thursday, it said producer prices accelerated, boosted by strong gains in gasoline and healthcare costs. The Labor Department's producer price index for final demand increased 0.4 percent last month after being unchanged in December.
The Broad Basket fund category invests across the breadth of the commodities markets: metals (nickel, copper), energy products (crude oil, heating oil, unleaded gasoline, natural gas) agricultural products (cotton, sugar, soybeans, wheat, live cattle).
The demand for commodities has also filtered through hedge funds, which have their highest exposure to commodities since 2012, Credit Suisse reported.
Major money managers DoubleLine and Pacific Investment Management Co (Pimco) have expressed bullishness around commodities.
In a Dec. 5 webcast, DoubleLine chief executive Jeffrey Gundlach, known as Wall Street’s Bond King, told investors commodities were attractive relative to U.S. stocks, which have been in a multiyear bull market.
Wall Street had wildly volatile trading last week that pushed the market into correction territory. Since Thursday, the S&P 500 has surged 4.56 percent, its strongest four-session performance since mid-2016. The index remains down about 6 percent from its record high on Jan. 26.
Gundlach also said in December that commodities prices historically have surged late in past economic cycles. Assets of the DoubleLine Strategic Commodity Fund, launched in May 2015, have grown from around $30 million as recently as last December to the current $207 million.
Mihir Worah, Pimco's CIO of asset allocation and real return, has said "we know historically commodities do well in the late stages of an expansion as supply bottlenecks fail to keep up with demand growth." (Reporting by Jennifer Ablan; Editing by Matthew Lewis and David Gregorio)