Which Aluminum ETF Is Right For You? JJU vs. FOIL

Over the years, aluminum has made its stance in the world, becoming one of the most popular metals in both the industrial and financial universe. Aluminum is also one of the most abundant metals on earth as well as the third most widespread element. Its low density and ability to withstand corrosion makes it a popular choice for a wide variety of uses, stretching from foil and cans to cars and aircraft.

Because of its numerous applications, the metal has also found its way into many investor’s portfolios, providing yet another potentially lucrative opportunity in the commodities space. And thanks to the development of the exchange-traded fund industry, investors now have several ways to gain access to this industrial commodity. Below, we outline the two most popular aluminum ETFs and which one will fit your investment objectives [see also Jim Rogers Says: Buy Commodities Now, Or You’ll Hate Yourself Later]. 

Dow Jones-UBS Aluminum Total Return Sub-Index ETN (JJU)

Quick Stats (as of 8/31/2012)

Barclays iPath’s JJU was the first ever aluminum ETF to hit the markets, offering investors exposure to the popular industrial metal through the use of futures contracts. Since inception in 2008, the fund has slowly made headway in the financial world, accumulating just over $3.2 million in total assets under management. JJU provides exposure to aluminum prices by tracking an index that consists of only one futures contract on aluminum. It is important to note however, that JJU is structured as an exchange-traded note, meaning investors will be exposed to the potential credit risk of the issuing  institution [for more commodity updates subscribe to our free newsletter].

JJU is Right for You if: You are an investor seeking to speculate on aluminum’s movements through the use of futures trading. 

Pure Beta Aluminum ETN (FOIL)

Quick Stats (as of 8/31/2012)

This cleverly-named fund is another popular aluminum exchange-traded product available on the market, offering investors exposure to aluminum prices through the futures market, but with a slight twist. Unlike JJU which rolls its holdings on a monthly basis, FOIL 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 or backwardation on returns. This is perhaps the fund’s most alluring feature, considering how both of these futures trading nuances can make a devastating impact on bottom line returns. Although the fund is not as large as JJU, it does have relatively healthier daily trading volume of 1,600 on average. Like JJU however, FOIL is also structured as an exchange-traded note, meaning that investors will be exposed to the potential credit risk of the issuing institution.

FOIL is Right for You if: You are an investor looking to achieve aluminum futures exposure, but want a methodology that helps avoid the adverse affects of contango. 

Don’t forget to subscribe to our free daily commodity investing newsletter and follow us on Twitter @CommodityHQ.

Disclosure: No positions at time of writing.

About Daniela Pylypczak

Daniela Pylypczak-Wasylyszyn is a regular contributor to CommodityHQ.com, where she primarily focuses on commodity producers equities. She is also an analyst for ETFdb.com, 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, Fidelity.com, and Yahoo! Finance. Daniela is also a contributor for TraderHQ.com and Dividend.com. Daniela graduated from DePaul University with a bachelor’s degree in finance and economics.
This entry was posted in Aluminum, Asset Allocation, Commodity ETF Analysis, Commodity ETFs, Commodity Futures, Industrial Metals 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.

One Response to “Which Aluminum ETF Is Right For You? JJU vs. FOIL”

  1. [...] sector that makes use of some of the metallic ores it produces – particularly metals like aluminum and chromium that are used in its automobile industry. The country also consumes a meaningful [...]

Leave a Reply to A Deeper Look at South Africa’s Commodity Industry | Commodity HQ

  • Subscribe

    • RSS Icon   Twitter Icon
    • Sign up for free today:
  • Search