Commodities: Precious Metals Silver
The best silver fund overall is SIVR, with its physical silver-based portfolio, best-in-class 30 bp expense ratio, and sufficient liquidity. If you're looking for exposure to silver
“The best silver fund overall is SIVR” spot prices, it simply does not get any better. That said, active traders might prefer the more-expensive SLV, which trades in greater volume by two orders of magnitude, with slightly narrower spreads. Both funds hold physical silver and thus do a perfect job tracking spot silver prices after their respective expenses.
SLVO, launched in Apr 2013, is the newcomer of the segment. SLVO charges 65 bps to hold SLV and write front month calls. It is a novel strategy that tries to generate yield from call premia on a yield-less asset. The novel strategy has generated a modest amount of investor interest.
The other two products—DBS and USV—that compete in the segment hold futures contracts on silver, rather than silver itself, so they don't track silver as well. Due to a persistent contango, each fund has underperformed their physical counterparts, SIVR and SLV. While USV charges a reasonable 40 bp expense ratio, DBS's 72 bps makes it far more expensive than its peers. In addition, neither are particularly liquid, making both unattractive vehicles for exposure in the space. (Insight updated 02/27/17)
All Funds (5)
SLV $6.03 B 6032290000 Most liquid
SIVR $357.16 M 357158200 Best in class
DBS $28.27 M 28265906.951054 Most expensive
USV $4.26 M 4255380 Futures-based, low volume
SLVO $47.22 M 47220411.959881 Use caution trading
ETF.com Grade as 02/23/17
Commodities: Precious Metals Silver
ETF.com Efficiency Insight
The most Efficient fund in the segment is SIVR, with the lowest expense ratio (30 bps) and nearly-perfect tracking record. SLV clocks in right behind, with a 50 bp expense ratio and
“The most Efficient fund in the segment is SIVR” similarly strong tracking after expenses. On the other hand, the two futures-based funds struggle. USV charges a reasonable 40 bps, but has some trouble tracking its underlying index consistently. DBS has even more trouble tracking its index, mostly due to its segment-high 72 bp expense ratio. SLVO, which follows a covered-call strategy, tracks well on a median basis but with significant variability.
The five silver ETFs also fall into three different legal structures. SIVR and SLV are both grantor trusts, which means that they're taxed as collectibles, with a higher long-term gains tax rate (a maximum of 28%). DBS is a commodity pool, so it is taxed at a blended rate (60% long-term, 40% short-term) regardless of the holding period. DBS also distributes K-1s at year-end. The others, USV and SLVO, are ETNs and are taxed like equities, with long-term gains taxed at a maximum rate of 20% and short-term gains taxed as ordinary income. (Insight updated 02/27/17)
ETF.com Tradability Insight
SLV is the big kahuna of the group, with a massive number of shares changing hands each day. Frequent traders need look no further, since its spreads are also best in class. SIVR can also
“SLV is the big kahuna of the group” be traded with relative ease.
The other three funds (DBS, USV and SLVO) are much harder to trade. Their volumes are mediocre at best, and spread are often wide, so limit orders are an absolute must.
All funds in the segment earn perfect block liquidity scores, so can be easily traded in size with the aid of a market maker. (Insight updated 02/27/17)
ETF.com Fit Insight
The segment has 3 strategies: Physical silver holding, futures contract, and silver covered call.
SIVR and SLV are clear Fit leaders since they hold physical silver, thus giving a
“SIVR and SLV are the perfect silver funds” direct and precise exposure to silver spot price. In contrast, USV and DBS hold silver futures contracts, which are imperfect proxies for spot. Further, they don't hold the front-month futures contracts on the metal, which are the most responsive to spot price movements. Instead, both try to beat contango by picking different contracts: USV uses a set of 5 futures contracts of different maturities while DBS just picks the 1 with the most attractive position on the futures curve. As such, they have trouble tracking spot silver and indeed have underperformed the physical metal over most time periods.
SLVO's combination of holding physical-silver and writing calls has created an interesting product. The strategy should outperform spot silver in a sideways or down market but underperform in a sharply upward market as the options will be called away. (Insight updated 02/27/17)