Commodity ETF

Discussion in 'ETFs' started by GlobalMacro90, Sep 3, 2018.

  1. Any good general commodity ETFs (mostly passive exposure) you guys like? I know the asset class in general has been terrible the last 10 years, and for that reason I am thinking of adding some commodity exposure to my equity heavy models.

    I know there is good and bad practices in developing a commodity index, and wanted some input from traders who know more than me.

  2. srinir


    Passive commodity exposure has been terrible investment overall. It is better to get exposure via managed futures.

    That being said, I do own teeny bit of PDBC etf. It is sister fund of DBC etf, but with no K1 exposure like DBC. Also it is much cheaper compared to DBC.

    Other no K1 etf's with recent launchings are BCI, BCD which follows Bloomberg commodity index (rebadged version of Dow jones AIG commodity index).

    There are other ETF's like USCI which actively manages using combination of momentum and backwardation. It also has its own flaw's when i last checked.
  3. Trader13


    Whichever general commodity ETF you choose, be sure to check the weightings of the various commodity categories it holds. Some of them are heavily weighted in one category (e.g., energy) and you're really not getting the diversification you're seeking if you wanted to diversify across energies, ags, metals, etc.

  4. Thank you very much for the detailed response, as this is not my area of expertise it is very much appreciated. Would you mind expanding on why you dont love USCI (this was the ETF I was leaning towards)? How about an ETF like SDCI? Thanks in advance.
  5. srinir


    It has been a while since i went thru' this process.

    1) USCI issues K1, while PDBC does not
    2) Expense ratio is about 50 basis points above PDBC and now 75 bp above recent commodity etf's like BCI and BCD.
    3) Lot of tracking error to its index (Summerheaven Dynamic commodity index). 170 bp of tracking error is too much.
    4) Performed well in backtest, but real life result is not much different from other commodity etf's

    I did not knew about SDCI. It looks like sister ETF to USCI, while avoiding K1. This is similar to DBC & PDBC. They add actively managed part to basically to get around pesty K1 issue. PDBC is also actively managed ETF while not much different than DBC.
  6. Thank you for this information.
  7. comagnum


    Here you go. Expenses are 0.89% and the avg volume is 373K. Not my cup of tea since I use futures.

  8. It seems to me commodity ETFs are generally mediocre unless you invest in oil just before a big oil rally or such.