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moneysense.ca, 21/07/10
A survey of broad commodity index ETFs and ETNs
I couldn’t find a fund that tracks the Thomson Reuters / Jefferies CRB Index but the Greenhaven Continuous Commodity ETF (NYSE Arca: GCC) tracks an equal weighted index of 17 commodities. The MER of GCC is 0.85%. The fund also has an estimated futures brokerage fee of 0.24%.
The most popular commodity ETF is the PowerShares DB Commodity ETF (NYSE: DBC). It tracks the DB Liquid Commodity Index, a basket of 14 commodity futures. Energy has a 55% weighting followed by agriculture (22.5%), industrial metals (12.5%) and precious metals (10%). The MER is 0.85% and the estimated futures brokerages expenses are 0.08%.
DJP and DBC appears to be the most popular with commodity investors. DJP is an exchange-traded fund that tracks a more diverse index. DBC is an exchange-traded fund tracking an index that has a high energy concentration. With so many products now tracking commodities, will this asset class continue to provide the equity-like returns coupled with low correlation it did in the past?
moneysense.ca, 21/07/10
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It’s important to remember that these funds are tracking a benchmark of rolling futures (a set of futures contracts for typically the upcoming month that is sold before expiry, at which point contracts for the next month are bought) and are not the same as holding the commodity itself. In fact, if you hold a fund which rolls over monthly, like the popular USO, for the long term (more than several months) you aren’t even going long on the commodity price so much as you’re going short on the rate of change of the commodity price. Read up on “contango” and “backwardation” to understand a bit more about commodity futures.
@Rob: I’m personally not adding any commodity futures ETFs or ETNs to our portfolios. With close to 1/2 the value of the TSX Composite in commodities, I think we have plenty of commodity exposure already.
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