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ETF Chart of the Day: Commodities Conundrum


A notable broad based Commodity futures fund has seen some decent sized redemption activity this week, as DBC (PowerShares DB Commodity Index, Expense Ratio 0.93%) has lost more than $335 million lately.

The fund still has well more than $5 billion in total assets under management but these recent flows and heavier trading volume is certainly notable given the “mixed bag” performance that we have seen lately in the Commodity space. DBC’s heaviest weightings are to Brent Crude Oil (13.83%), Gasoline RBOB (13.71%), WTI Crude Oil (13.56%), Heating Oil (13.20%), and Gold (7.49%), and it is no secret that fuel oils have had an impressive rally lately.

Gold on the other hand is trading once again at its lowest levels since July (GLD actually traded as low as $114.50 yesterday, a multi-year low, before recovering somewhat into today. Other top holdings in DBC include Sugar (5.50%), Corn (5.01%), and Copper (4.55%), and the fund follows an index methodology that owns fourteen separate commodities via futures at all times.

The idea behind the diversified exposure across commodities is of course to temper the overall volatility and potential risk in the overall portfolio, and there are several other ways to play commodities with a diversified tracking fund, and DBC remains the largest in assets under management by a mile at the moment.

DJP (iPath DJ-UBS Commodity Index Total Return ETN, Expense Ratio 0.75%), GSG (iShares GSCI Commodity Indexed Trust, Expense Ratio 0.75%), RJI (ELEMENTS Rogers International Commodity Index Total Return ETN, Expense Ratio 0.75%), USCI (United States Commodity Index Fund, Expense Ratio 0.95%), and GCC (GreenHaven Continuous Commodity Index, Expense Ratio 0.85%) are also prominent funds in the space in terms of asset size and average daily trading volume, with several other specialized but much smaller funds in the category as well.

With the wide dispersion of returns in various commodities relative to each other in 2013 and especially lately, with things such as Precious Metals taking it on the chin while Natural Gas, Oil, and Gasoline rally to recent highs, and left for dead commodities like Coffee and Sugar have all of a sudden sprung to life again, expect to see additional activity in such funds in the next couple months as managers rebalance portfolios.

PowerShares DB Commodity Index Fund

For more information on Street One ETF research and ETF trade execution/liquidity services, contact Paul Weisbruch at pweisbruch@streetonefinancial.com.

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