Commodity ETF Spotlight: BCM In Focus

The exchange-traded products industry has provided investors with a new tactical tool for adding commodities exposure to their portfolios. Investors can now choose between a variety of ETPs that offer both broad-based and targeted exposure without having to encounter the difficulties and drawbacks of opening a futures account. One of the newest products on the market is the Pure Beta Broad Commodity ETN (BCM), which gives investors access to a basket of 24 different commodities [see also Why The IEA Is Backing Nuclear Power].

BCM’s structure and unique methodologies make this ETN an appealing option for investors who wish to establish a broad-based and long-term commodities position in their portfolio

Vital Stats

Here’s a quick overview of the basics of BCM:

  • Issuer: Barclays iPath
  • Index: Barclays Capital Commodity Index Pure Beta TR
  • Number of Commodities: 24
  • Largest Allocation: Gold (21.3%)
  • Inception Date: April 21, 2011
  • Expense Ratio: 0.75%
  • Assets: $10.3 million (as of 12/2/2011)
  • Structure: Exchange-Traded Note

Under The Hood

BCM seeks to replicate the Barclays Capital Commodity Index Pure Beta TR, offering exposure to 24 different commodity futures contracts. The index breakdown by commodity family is presented in the following table (as of 11/30/2011) :

Commodity Group
Index Weight
Energy 38%
Precious Metals 25.16%
Agriculture 20.4%
Industrial Metals 13.84%
Livestock 2.6%

BCM features allocations across all of the major segments of the commodity market, including exposure to energy, precious metals, agriculture, industrial metals, and livestock. BCM’s underlying portfolio is broad-based and well-rounded with relatively equal allocations to the energy, precious metals, and agriculture sectors [see also Invest Like Jim Rogers With These Three Agriculture Stocks].

Noteworthy Features

BCM is one of the most unique new commodity ETPs on the market, offering investors exposure to a well-rounded portfolio of 24 different commodities. Unlike most commodity products that use a pre-determined roll schedule, BCM applies the Barclays Capital Pure Beta Series 2 Methodology, which allows the fund to roll into a number of futures contracts with varying expiration dates. This variable roll schedule may mitigate much of the negative impact of contago or backwardation on returns, making BCM an appealing option for investors looking to establish a commodity position over the long term [see also Three Commodities Dividend Lovers Must Own].

It is worth noting that BCM is structured as an exchange-traded note, meaning investors will take on exposure to the possible credit risk of the issuing institution. Although the ETN structure has several drawbacks, BCM does produce a number of advantages over comparable ETFs. Unlike funds that trade futures contracts, commodity ETNs do not require investors to fill out a K-1 form at the end of the year. This benefit implies that there is no annual mark-to-market that spurs a taxable event, and shareholders of BCM have to record a loss or gain only upon sale [see also Commodity Trading Trends: Gold Stuck In A Correlation Rut].

How To Use

BCM’s advantageous tax treatments and unique Pure Beta methodology makes this ETN an appealing option for investors wishing to add long-term, buy-and-hold commodity exposure. Unlike most commodity ETPs that are biased towards the energy sector, BCM’s well-diversified portfolio maintains relatively balanced allocations towards energy (38%), precious metals (25.16%), and agriculture sectors (20.14%) while also giving exposure to industrial metals and livestock. When considering the portfolio’s largest holding, BCM is an attractive option for investors who are bullish on gold prices. This ETN could be used as a tool for those who wish to establish a well-balanced and broad-based commodity position in portfolios with longer time horizons [see also 25 Ways To Invest In Silver].

Disclosure: No positions at time of writing.

About Daniela Pylypczak

Daniela Pylypczak-Wasylyszyn is a regular contributor to, where she primarily focuses on commodity producers equities. She is also an analyst for, where she contributes articles and analysis each week. Since joining the team in 2011, Daniela has quickly grown to be one of the most widely-followed authors in the industry. Her articles are syndicated in a number of online publications, including Financial Advisor Magazine,, and Yahoo! Finance. Daniela is also a contributor for and Daniela graduated from DePaul University with a bachelor’s degree in finance and economics.
This entry was posted in Commodity ETF Analysis, Exclusive and tagged . Bookmark the permalink.

Commodity HQ is not an investment advisor, and any content published by Commodity HQ does not constitute individual investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities or investment assets. Read the full disclaimer here.

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