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Commodity ETFs Slump Amid Fed Speculation


Commodity exchange traded funds have experienced a rough first half of the year as traders anticipated an eventual end to Fed easing that has helped support commodity prices.

The PowerShares DB Commodity Index Tracking Fund (DBC) lost 0.8% over the past month and fell 6.1% year-to-date.

Hedge fund investors posted significant losses in June, and now, many commodity funds are now in negative territory for the first half of the year, reports Stephen Taub for Institutional Investor’s Alpha.

Commodity funds with combined assets of about $10 billion run by high-profile commodity traders like, Andy Hall, Stephane Nicolas, Chris Levett, Neal Shear and Chris Brodie, announced negative returns through he first five months of the year, reports Barani Krishnan for Reuters.

The average commodity fund fell between 2% and 5% in June and have declined 2% to 4% over the first six months of the year.

“The commodity space has been challenge in terms of generating performance and gaining assets,” Peter Laurelli, vice president of eVestment, commodity funds, said in the IIA article. “But it’s possible the recent sell-off in precious metals, along with rising energy prices, sparked what may be seen as a turning point in the space, at least in the eyes of investors via flows.”

Commodities stumbled as investors mulled over Fed and global central bank policies.

“Markets continue to fixate on central bank policy rather than the real economy,” Astenbeck’s Andy Hall said in a letter to investors.

Nevertheless, Hall, a well-known oil bull, anticipates greater demand for oil.

“As we move into June, 3Q and beyond, there will be a very substantial pick up in global oil demand,” Hall added.

Additionally, the Hall is leaning toward platinum, palladium, corn and gas. [Gold ETFs See Outflows Despite Higher Prices]

“‘The commodity super-cycle is over’, is the current mantra,” Hall wrote in his May letter. “We think this received wisdom is flawed.”

The PowerShares DBC ETF provides exposure to a basket of commodities, including aluminum, brent crude, copper, corn, gold, heating oil, light crude, natural gas, RBOB gasoline, silver, soybeans, sugar, wheat and zinc.

Some of the best performing commodity-related ETFs so far this year include those that track oil and cotton, including USO (USO) up 12.9% year-to-date and iPath Dow Jones-UBS Cotton ETN (BAL) up 10.7%. The worst performers include metals related funds like the PowerShares DB Silver Fund (DBS) down 36% year-to-date and United States Metals Index Fund (USMI) down 33.3%. [Gold/Oil Ratio: Which Commodity Will Win?]

For more information on commodities, visit our commodity ETFs category.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.