Commodities: Precious Metals Platinum
In the platinum segment, assets under management tell the whole story. One fund, PPLT, is the clear leader among its peers—both in terms of assets, and investment suitability. With
“PPLT, is the clear leader among its peers” nearly $600M in AUM, PPLT holds more than 90% of segment assets and is the cheapest and most liquid fund in its segment. Furthermore, it is the only product that actually holds physical platinum, rather than futures contracts on platinum, so it provides the most direct and best exposure to platinum spot prices.
The other two funds in the segment, PTM and PGM, are futures contract based and thus are at best imperfect proxies for platinum spot prices. Neither has consistently beaten nor underperformed spot platinum, but can provide significantly different performance. In addition, both ETNs are closed to creations, so they can trade at false premiums at times of high demand. Given that they're also more expensive than PPLT, there's really no reason to recommend them. (Insight updated 03/28/17)
ETF.com Efficiency Insight
PPLT is the most Efficient fund in the segment, with the lowest expense ratio and best tracking record. It is the only fund that holds the physical commodity (the other two track
“PPLT has the lowest expense ratio and best tracking record” futures-based indexes) and is the most stable of the bunch with about $600M in AUM.
The other two funds—PTM and PGM—charge higher fees and have more volatile tracking error. PTM charges 65 bps. PGM is even more expensive, with a fee of 75 bps. Additionally, PGM has a performance based expense structure such that its fees rise when the note is doing well and fall when it is not. PTM and PGM both typically lag their indexes by over 100 bps.
PTM and PGM also have much lower asset counts than PPLT: each note's AUM is a tiny fraction of PPLT's. We see high closure risk for both.
The one advantage the two futures-based funds have over their larger competitor is taxes—due to their ETN structures, PTM and PGM see gains taxed at the regular capital gains rates, while investors in PPLT must pay the higher collectibles rate. Still, the two fund's steep holding and trading costs, as well as higher risks, are unlikely to be offset by lower taxes. (Insight updated 03/28/17)
ETF.com Tradability Insight
PPLT is the only product in this segment that one can trade with any confidence. Luckily, it's a very liquid fund, with a median daily volume of over $3M and average spreads of 13 bps.
“PPLT is the only product in this segment that one can trade with any confidence” It also earns a perfect block liquidity score, indicating that it can be bought at reasonable spreads in large blocks with the aid of a market maker.
The other two ETNs are more difficult to trade, especially so in large blocks. Both are closed to creations, meaning market makers can't create new shares to keep the notes trading close to their fair values. Both trade at thin volumes—typically far less than $100K for each fund. Bid/ask spreads between the two vary widely. PTM trades at an average spread of over 50 bps. PGM falls way behind the other two, as it trades at abysmal spreads exceeding 100 bps. Thus, even if you aren't worried about the note trading at a false premium (and you should be), it's still unappealingly illiquid. (Insight updated 03/28/17)
ETF.com Fit Insight
PPLT earns the best Fit score in the segment since it actually holds physical platinum. In contrast, the other two products are linked to futures contracts on platinum which are imperfect
“for a direct and pure exposure to platinum, you simply cant beat PPLT.” proxies of platinum spot prices. If futures are in backwardation (unlikely for platinum), PTM and PGM should beat PPLT, but if you're looking for a direct and pure exposure to platinum you simply can't beat PPLT. (Insight updated 03/28/17)