Commodity ETFs burst onto the scene in the 2000s, and the industry has never looked back. These products brought the world of commodity trading, once reserved for only the most sophisticated institutions and individuals, to the hands of retail investors around the world. Unfortunately, many investors look to the most popular products when searching for the right investment objective and often miss some of the effective funds because they have not gathered the same level of assets as their peers [for more commodity ETF news subscribe to our free newsletter].
Below, we outline three strong commodity ETFs that you may have never heard of, simply because their size and popularity does not match that of some of the industry juggernauts.
1. Commodity Country Equity Fund (CCXE)
This fund employs a one-of-a-kind strategy investing in dividend-paying equities domiciled in major commodity producing nations. CCXE splits country allocations almost evenly between the following nations: Australia, Brazil, Canada, Chile, New Zealand, Norway, Russia and South Africa. Despite strong returns in recent years and a handsome dividend yield of 3.59%, the fund has only $27 million in assets. For anyone looking to make a play on the production side of the commodity world, CCXE is worth a closer look.
2. Teucrium Natural Gas Fund (NAGS)
NAGS debuted in early 2011, but it has remained relatively under the radar thus far. At first glance, many were warded off by NAGS’s 150 basis point fee, but a closer comparison with other natural gas ETFs paints one clear winner. For the calendar year 2012 (a notably poor stretch for this commodity) NAGS lost 16.57%. Compare those losses to UNG‘s -26.85% performance and UNL‘s -18.37%, and NAGS takes the cake, even after factoring in expenses. NAGS’ strategy never holds spot, but instead trades the four shoulder months for natural gas, allowing the fund to avoid contango and outperform its competitors [see also Understanding Contango Through Natural Gas Futures].
3. E-TRACS UBS Bloomberg CMCI Gold ETN (UBG)
When it comes to gold exposure, investors are almost instantly drawn to the SPDR Gold Trust (GLD), as its physically-backed structure has made it the second largest ETF in the world. But this futures-based ETN may have a leg up on its larger counterpart. Because it holds physical bullion, GLD is taxed as a collectible at 28% no matter how long you hold it. UBG, on the other hand, is only subject to long-term capital gains of 15%, and it also charges a full 10 basis points less than GLD. As far as net returns are concerned, UBG is certainly equipped to defeat GLD over the long term.
Disclosure: No positions at time of writing.