Through the end of September, 2012 has by and large been another solid year for commodities. Measuring commodity performance can be a little tricky though, as many commodity ETFs and ETNs hold various contracts throughout the year and roll those contracts according to their investment mandate. What that means is that ETF/ETN performance can vary from the underlying commodities [for more commodity ETF news and analysis subscribe to our free newsletter].
While many regular investors do find that commodity futures offer certain advantages as investment options, a large number look to get their exposure through ETFs and ETNs, and it is the performance of these vehicles that we will use as proxies for this article.
- Silver: Although silver often takes a backseat to gold in the minds of precious metal investors, silver and the iShares Silver Trust (SLV) have done well this year. This large and liquid ETF is up just over 24.7% on a year-to-date basis. That’s above the 23.1% return of the futures, but the Silver Trust ETF does not have the same mark-to-market rules (though it does carry a 0.50% management fee) [see also 25 Ways To Invest In Silver].
- Soybeans: The second-best performing commodity ETF/ETN of the year so far might surprise some people – it’s the Teucrium Soybean Fund (SOYB). This is not a large ($11.1 million in NAV) fund, but the liquidity is decent (about 30,000 a day). Moreover, investors have logged a 17% year-to-date gain with this fund, as soybeans soared in the spring and fall. Once again, though, investors have to consider what is lost with the construction of the fund, as chained soybean futures are up nearly 30% for the year.
- Gasoline: The third-best commodity ETF/ETN so far this year is the United States Gasoline ETF (UGA), a fund that tracks the RBOB futures contract (unleaded gasoline). Larger than the Soybean Fund ($71 million in net assets), the US Gasoline ETF is a little more liquid (49,000 shares of average daily volume). So far to date, this fund is up nearly 25%.
- Cocoa: Coming in fourth is the iPath Cocoa Total Return Sub-Index ETN (NIB). This ETN has seen almost 18% appreciation this year, with reasonable liquidity. Investors should note that even by the standards of commodity markets, cocoa is an uncommonly volatile commodity – with prices trading between $1,898 and $3,826 per metric ton over the past two years [see also The Five Minute Guide to Cocoa ETFs].
- Corn: While much has been made of the severe drought in the Midwest this year and soaring corn prices, corn prices have actually come off their highs and the corn ETF, Teucrium Corn (CORN) is up 10% year to date. That’s well below the 27% underlying performance of the chained futures contracts. By the standards of commodity ETFs and ETNs, Teucrium Corn is relatively large ($67 million NAV) and liquid (135,000 shares per day on average). It’s also worth noting, though, that the fund’s 1.00% expense ratio is on the high end of the sector.
Disclosure: No positions at time of writing.