The rapid development of the ETF industry has cracked the world of commodity investing wide open, allowing average investors to gain cheap and easy access to a previously hard-to-reach asset class. And while some choose to focus on a single commodity, many investors also look for more diversified exposure, or perhaps even an equity spin on the space. As the ETF industry continues to expand, investors are now able to pick and choose from hundreds of products [for more commodity ETF news and analysis subscribe to our free newsletter].
Six months ago, issuers US Commodity Funds, Exchange Traded Concepts and BNP Paribas rolled out yet another three intriguing commodity exchange-traded products; a diversified metals portfolio (USMI), an oil sands ETF (SNDS) and a global commodities fund (BNPC). Though it is still too early to tell whether or not these funds will be successful, together these three funds have accumulated over $20 million in assets under management. Below we take a look at how these three funds have fared over the last six months:
United States Metals Index Fund (USMI)
This offering from US Commodity Funds is designed to reflect the performance of a diversified group of 10 metals futures contracts: aluminum, copper, nickel, zinc, lead, tin, platinum, silver, palladium and last but certainly not least, gold. What distinguishes USMI from other funds is that its underlying index attempts to maximize backwardation and minimize contango while still using contracts in the liquid portions of the futures curve [see also Inside Citi's 2013 Precious Metals Outlook].
But considering the other broad-based metals ETFs, namely PowerShares’ ultra-popular DBB, it seems as thought USMI might be in for some steep competition. Currently, the fund has only accumulated $2.7 million in total assets and trades less than 2,000 times a day on average. Since inception in June of this year, USMI has lost a little over 1%, while in the same timeframe, DBB has gained more than 6%. Obviously only time will tell if this fund can prove its worth, though considering its issuer is the creator of UNG, it may still be able to pick up steam.
Sustainable North American Oil Sands ETF (SNDS)
This ETF is currently the only fund that is designed to target oil sands, a quickly growing, though often overlooked, sub-sector of the oil and gas industry. SNDS invests in companies whose operations in the North American oil sands include oil exploration, production and refinement. The equally-weighted fund features exposure to big names like Phillips 66, Marathon Petroleum and Murphy Oil, as well as many others.
Since inception, SNDS has accumulated a mere $1.1 million in total assets and trades barely 1,000 shares a day on average. Although investor interest has been rather slow to catch on, its performance in the last six months certainly warrants a closer look. From June to December of this year, SNDS has gained an impressive 12.9% [see also 10 Ways to Invest in Fracking].
STREAM S&P Dynamic Roll Global Commodities Fund (BNPC)
This broad-based commodity fund has gotten the most attention by far from investors, accumulating over $17.6 million in total assets under management in its short lifespan. BNPC Paribas, a French banking behemoth, jumped into the commodity ETF space with its launch of BNPC in early June. The fund seeks to replicate the S&P GSCI Dynamic Roll Excess Return Index, a broad-based index of commodity futures that uses a flexible methodology to tilt the portfolio depending on prevailing market conditions. To complete its objective, BNPC generally oscillates between near-dated futures contracts and longer-dated contracts.
Currently, BNPC’s portfolio is tilted towards energy futures, with crude, Brent, heating oil and gasoline accounting for a significant portion of assets. Since June, the fund has gained nearly 7.50%, suggesting that perhaps its dynamic roll strategy may be an appealing option for those looking for diversified exposure to the commodities space.
Disclosure: No positions at time of writing.