Here’s our monthly look at:
1. How the numerous commodity ETFs which have sprung onto the scene the past few years are tracking a simple strategy of just buying the December futures market of that commodity, under the theory that the ETF will have to roll their positions periodically throughout the year, and in doing so take on costs the simple strategy does not have.
2. How the passive investment strategy of being long commodities (either via futures or ETFs) compare to an active strategy going both long and short commodity markets via a professional commodity trading advisor (as tracked by the BarclayHedge Ag Trader Index).
Commodity ETF Over/Under Performance 2014
Commodity | Futures | ETF | Difference |
|---|---|---|---|
| Crude Oil | $CL_F -03.01% | $USO -1.47% | 1.54% |
| Brent Oil | $NBZ_F -3.78% | $BNO -3.81% | -0.03% font> |
| Natural Gas | $NG_F 6.58% | $UNG 16.86% | 10.28% |
| Cocoa | $CC_F 6.74% | $NIB 7.29% | 0.54% |
| Coffee | $KC_F 10.99% | $JO 14.56% | 3.57% |
| Corn | $ZC_F -0.05% | $CORN 0.98% | 1.03% |
| Cotton | $CT_F -2.58% | $BAL 1.40% | 3.99% |
| Live Cattle | $LE_F 1.91% | $CATL -0.86% | -2.78% font> |
| Lean Hogs | $LH_F 1.10% | $HOGS 3.17% | 2.07% |
| Sugar | $SB_F -3.40% | $CANE -4.52% | -1.12% font> |
| Soybeans | $ZS_F -2.68% | $SOYB -3.28% | -0.59% |
| Wheat | $ZW_F -9.01% | $WEAT -8.47% | 0.54% |
| Average strong> | 0.23% strong> | 1.82% strong> | 1.58% strong> |
| Commodity Index $DBC | -3.00% | ||
| Long/Short Ag Trader CTAs | 0.44% |
(Disclaimer: Past performance is not necessarily indicative of future results)
(Disclaimer: Sugar uses the October contract, Soybeans the November contract.)
Long/Short Ag Trader CTA = Barclayhedge Ag Traders Index
As is usually the case, the ETF’s tend to outperform in the first month of the year, before the ETFs have had to start rolling their contracts (much of the ETF underperformance we observe is generated by one glaring inefficiency – they have to roll their front-dated futures contracts repeatedly throughout the year, creating a cost drag).
