A List Of The Top Ten (10) Commodity Sector Tracking ETFs (DBC, DJP, GSG, RJI, GCC)

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September 2, 2011 4:14pm NYSE:DBC NYSE:DJP

David Fry:  Our goal in this profile is to help investors wade through the many competing ETF offerings available. Using our long experience as an ETF publication, and nearly 40 years in the investment business, we can help select those ETFs that matter and may or may not be repetitive.


 The result is a more manageable list of issues from which to view and make selections.

With inflation pressures waxing and waning many believe it’s important to have portfolio exposure to a basket of commodity ETFs. Why? Because commodity markets often feature noncorrelated performance with conventional portfolios. Further, given easy money policies which began in 2008 has hurt the value of the dollar. Since most commodities are priced in dollars this puts upward pressure on prices which can become inflationary. We’ve cobbled some good choices of commodity tracking ETFs and ETNs where repetitive choices may exist but leave it to investors to pick the ones that suit them best.

As a former CTA (Commodity Trading Advisor) and CPO (Commodity Pool Operator) I know the value of having an allocation of most portfolios to the commodity sector. These provide increased diversification opportunities for any portfolio. And, in nearly 40 years of seeing these positive effects during a variety of market conditions, I know first-hand their benefits.

We’re not ranking these ETFs favoring one over another so don’t let the listing order mislead you. Although we may use some of these in ETF Digest portfolios it’s not our intention to recommend one over another.

Whereas our previous technical analysis methodology involved using evaluating monthly charts commodity markets must be viewed with shorter time horizons. This is due to obvious increased volatility but also due to the peculiar nature with which underlying commodity contracts trade. Some contracts expire monthly and others quarterly. Some have serious seasonal characteristics inherent with agricultural issues such as growing seasons, weather and disease. Therefore, it pays to be active and utilize a combination of weekly and daily charts to manage risk.

Four risk factors should be considered:

  • The CFTC’s varying considerations regarding commodity position limits as applied to the assets of ETF and ETNs—still in limbo.
  • The credit quality of ETNs given these are “notes” many guaranteed by Barclay’s and Deutsche Bank.
  • Backwardation (back month contracts lower than front month) and Contango (back months higher than front month) can negatively affect contract rollover for investors.
  • Since most commodities trade in dollars, the value of the dollar can positively or negatively affect performance.

ProShares and Deutsche Bank features inverse and leveraged long ETFs/ETNs for those investors wishing to hedge or speculate.

PowerShares Commodity Index Tracking ETF (NYSE:DBC) follows the DBIQ Optimum Yield Diversified Commodity Excess Return Index (a mouthful) which covers 14 of the most heavily traded and important physical commodities futures contracts in the world. The fund was launched in February 2006. The expense ratio is .75%. AUM (Assets under Management) equal $6.5 billion and average daily trading volume is 2.7M shares. As of mid-August 2011 there is no dividend and the YTD return was 6.20%.

Data as of August 2011

DBC Top Ten Holdings & Weightings

  1. Brent Crude Futr Mar12: 14.74%
  2. Gasoline Rbob Fut Dec11: 14.47%
  3. Heating Oil Futr Jun12: 14.34%
  4. Wti Crude Future Jul12: 12.73%
  5. Gold 100 Oz Futr Aug11: 8.15%
  6. Sugar #11(World) Jul12: 5.22%
  7. Natural Gas Futr Oct11: 5.20%
  8. Lme Copper Future Mar12: 4.43%
  9. Lme Pri Alum Futr Sep11: 4.10%
  10. Lme Zinc Future Jul12: 3.70%

Barclays iPath Commodity Tracking ETN (NYSE:DJP) follows the Dow Jones-UBS Commodity Index
Total Return and is currently composed of a variety of commodity futures contracts traded on U.S. exchanges. You’ll note a lesser weighting in energy in DJP versus DBC. The fund was launched in June 2006. The expense ratio is .75%. AUM $2.9 billion and average daily trading volume is less than 400K shares. As of mid-August 2011 the YTD return -2.14%.

iShares GSCI Commodity Index Tracking ETF (NYSE:GSG) follows the S&P GSCI Return Index which is an index created by Goldman Sachs including broad-based commodity futures contracts. The fund was launched in July 2007. The expense ratio is .75%. AUM equal $1.4 billion and average daily trading volume is 425K shares. As of mid-August 2011 the YTD return was -1.50%.

ELEMENTS Rogers Commodity ETN (NYSE:RJI) follows the Rogers International Commodity Index-Total Return which includes a basket of 36 commodity futures contracts designed by James Rogers in July 1998. The fund was launched in October 2007. The expense ratio is .75%. AUM equal $833 million with average daily trading volume 300K shares. As of mid-August 2011 the YTD return was -.43%.

The Index Weights are:

GreenHaven Continuous Commodity Index ETF (NYSE:GCC) follows the Continues Commodity Index-Total Return which is an equal-weighted index of 17 commodity futures contracts. The fund was launched in January 2008. The expense ratio is .85%. AUM equal $688 million and average daily trading volume is 185K shares. As of mid-August 2011 the YTD return was 4.70%.

Data as of August 2011

GCC Top Ten Holdings & Weightings

  1. Wheat Future(Cbt) Dec11: 1.03%
  2. Sugar #11 (World) Oct11: 1.03%
  3. Cotton No.2 Futr Dec11: 1.02%
  4. Coffee ‘c’ Future Dec11: 1.01%
  5. Cocoa Future Dec11: 1.01%
  6. Gold 100 Oz Futr Feb 12: 1.01%
  7. Platinum Future Jan12: 1.01%
  8. Soybean Future Jan12: 1.01%
  9. Corn Future Dec11: 1.01%
  10. Copper Future Sep11: 1.00%

US Commodity Funds Commodity Index ETF (NYSE:USCI) follows the SummerHaven Dynamic Commodity Index Total Return which is comprised of 14 futures contracts selected on a monthly basis from a list of 27 possible futures contracts as determined by quantitative formulas. The fund was launched August 2010. The expense ratio is .95%. AUM equal $44 million and average daily trading volume is 73K shares. As of mid-August 2011 the YTD return was .16%

UBS Bloomberg Constant Maturity Commodity ETN (NYSE:UCI) follows the UBS Bloomberg Constant Maturity Commodity Index Total Return Index which measures the collateralized returns from a basket of 26 commodity futures contracts with those diversified from three months to three years. The fund was launched in April 2008. The expense ratio is .65%. AUM equal $14 million and average daily trading volume is 32K shares. As of mid-August 2011 the YTD return was 1.78%.

Goldman Sachs Connect GSCI ETN (NYSE:GSC) follows the S&P GSCI Enhanced Commodity Total Return Strategy Index which uniquely is a long only investment in a broad basket of commodity futures contracts. The fund was launched in July 2007. The expense ratio is 1.25%. AUM equal $76 million and average daily trading volume is less than 12K shares. As of mid-August 2011 the YTD return was 1.03%.

UBS DJ-UBS Commodity ETN (NYSE:DJCI) follows the Dow Jones-UBS Commodity Total Index which is … The fund was launched in October 2009. The expense ratio is .50%. AUM equal $25 million and average daily trading volume is less than 5K shares. As of mid-August 2011 the YTD return was -1.52%.

PowerShares/DB Commodity Long ETN (NYSE:DPU) follows the Deutsche Bank Liquid Commodity Index which, sad to say, is an index shrouded in mystery since it’s details are impossible to find. The fund was launched in April 2008. The expense ratio is .75%. AUM equals $7.5 million and average daily trading volume is less than 2K shares. As of mid-August 2011 the YTD return was 2.25%.

There’s a rapidly expanding series of direct commodity ETFs and ETNs especially when inflation pressures wax and wane. We’ve chosen to feature some that may be repetitive but clearly have something to offer as well.

One thing seems clear when viewing many of these ETFs are the similar trend patterns many have presented. This is primarily due to globalization but also is the result of easy monetary conditions throughout the developed world allowing for higher prices for many commodities despite misleading official inflation data.

For further information about portfolio structures using this or other ETFs see www.etfdigest.com.

Written By David Fry From ETF Digest 

David is founder and publisher of ETF Digest and best selling book author of Create Your Own ETF Hedge Fund, A DIY Strategy for Private Wealth Management published by Wiley Finance in 2008.  In July of 2009, Fry was named in the ETF Hall of Fame as one of the Top 25 people who revolutionized the ETF industry and guided ETF investing from its conception to widespread acceptance among all breeds of investors. Fry founded the ETF Digest in 2001 and was among the very first to see the need for an online publication that provided individual investors and financial professionals with trading tools, market information and actionable advice on ETF investing.  ETF Digest was recently ranked 9th in the Top 100 ETF websites from Alexa on exchange traded funds. Dave Fry has devoted over 35 years to the business of trading and portfolio management. He is registered as an arbitrator with the Financial Industry Regulatory Authority (FINRA) and the National Futures Association (NFA).


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