Nevertheless, portfolio diversification makes commodities a useful asset to consider. The environment for commodities in recent years has been bad, and none of these ETFs have generated positive returns for their shareholders. Which commodity does ETF belong in your portfolio? That approach leaves the fund exposed to the same downward trends in commodity prices as its peers, but over time, it could help make up for part of the shortfall and add to performance during bull markets for commodities. By focusing on the futures market dynamics, the fund hopes to maximize the return available from rolling contracts into future months. Futures make up only about 30% of the fund's holdings, with swaps representing the remaining 70%. A twist on commodity exposureįinally, PowerShares came out with another commodity fund more recently that uses a combination of futures and swap contracts to get exposure to various commodities. It's evident how the relative lack of energy exposure has improved the fund's performance compared to its peers. Energy gets only a one-seventh weighting with gasoline and natural gas futures, while the agricultural realm gets the remainder, including cotton and soybean oil on the crop side and lean hogs, live cattle, and feeder cattle on the livestock side. Metals make up about half the portfolio, with gold being the only precious metal, joined by nickel, lead, tin, zinc, copper, and aluminum on the industrial side. The United States Commodity Index fund uses a slightly different methodology by making roughly equal-weight investments in 14 different commodity futures contracts. Livestock has a 7% exposure, and other soft commodities make up 6% of the portfolio. Energy gets a relatively small 28% allocation, and grain exposure comes in at 23%. Gold and silver combine to make up 17% of its portfolio, and base metals add another 18%. The iPath exchange traded product takes yet a different tack on commodity exposure. Taking its place is an 8% allocation to livestock, which the PowerShares fund omits. However, metals only get about 16% of the portfolio. Energy products get a 56% allocation, with agricultural crops getting 20% of the fund. The iShares commodity fund tracks the S&P GSCI commodity index, which has slightly different weightings. Metals cover the remaining 24%, with precious metals getting a 9.5% allocation and base industrial metals like zinc, copper, and aluminum making up the remainder. Crops like wheat, soybeans, corn, and sugar make up another 22% of fund assets. About 54% of the fund's assets are invested in crude oil, gasoline, heating oil, and natural gas futures. The PowerShares DB Commodity Index Tracking fund is the largest by assets, and it has a decided focus toward energy. Most of the ETFs track different benchmarks, and so they have slightly different allocations to various commodities. The primary difference among this five commodity ETFs is the particular mix of commodity exposure that they offer. PowerShares DB Optimum Yield Diversified Commodity Strategy Portfolio (NYSEMKT: PDBC)ĭata source: Fund providers. United States Commodity Index ( USCI 0.97%) IPath Bloomberg Commodity Index Total Return ( DJP 1.15%) IShares S&P GSCI Commodity-Indexed Trust ( GSG 1.88%) PowerShares DB Commodity Index Tracking ( DBC 1.38%)
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