Top Nickel ETFs: JJN vs. NINI2015-06-24
Although many associate this metal with the U.S. coinage system, nickel is actually one of the oldest known metals with uses tracing back more than 5,000 years. Today, the vast majority of the world’s supply of nickel comes from only two places: a mine in Ontario, Canada and another one in Siberia, Russia.
Nickel is generally prized for its anti-corrosive properties and for its ferromagnetic characteristics.
In regards to the U.S. five-cent piece, nickel only makes up a quarter of the coin’s composition but is still one of the biggest uses of the metal.
Because of nickel’s industrial uses and its ability to serve as a hedge against the U.S. dollar and inflationary pressures, investing in nickel has grown in popularity over the years. And thanks to the development of the exchange-traded fund industry, investors now have several ways to gain access to this popular industrial commodity. Below, we outline two nickel ETFs and how they will fit your investment objectives.
DJ-UBS Nickel Total Return Sub-Index ETN (JJN)
- Expense Ratio: 0.75%
- In Depth: JJN Analyst Report and ETFdb Realtime Rating
Barclays iPath’s JJN was the first-ever nickel ETN to hit the markets. However, since its debut in 2007, the fund has not been able to attract significant attention as a viable trading and investing instrument. JJN tracks an index that consists of only one futures contract on nickel, currently the Primary Nickel futures contract, traded on the London Metal Exchange. Although the fund may be appealing because of its simplicity, it has not been overly popular yet with investors. It’s also important to note that JJN is structured as an exchange-traded note, meaning investors will be exposed to the potential credit risk of the issuing institution [see also The Ten Commandments of Commodity Investing].
JJN is right for you if: You are an investor seeking to speculate on nickel’s movements through the use of futures contracts.
Pure Beta Nickel ETN (NINI)
- Expense Ratio: 0.75%
- In Depth: NINI Analyst Report and ETFdb Realtime Rating
NINI is the only other exchange-traded product available that offers investors exposure to nickel prices through the futures market, but with a slight twist. Unlike JJN, which rolls its holdings on a monthly basis, NINI does not roll exposure on a predetermined schedule; the roll timing is based on a proprietary “pure beta” methodology designed to reduce the impact of contango and backwardation on returns. This is perhaps the fund’s most alluring feature, considering how both of these futures trading nuances can have a devastating impact on bottom-line returns.
NINI is right for you if: You are an investor looking to achieve nickel futures exposure, but want a methodology that helps avoid the adverse effects of contango.