Futures-based commodities investment strategies have become increasingly popular in recent years as investors look for exposure to an asset class with returns that aren’t correlated to conventional portfolios, according to a blog post on The Street.
However, the risk-on/risk-off markets that have prevailed since the market crash of 2008 have contributed to a rise in correlations, making the choice of an investment vehicle more nuanced, the Street article said.
Sector allocations become more important in such an environment, the writer, Dave Fry, said in his Street blog post. Fry, who identified himself in the Street piece as a former commodity trading advisor, identified the following exchange-traded products as some of the best, given the current market challenges:
- PowerShares/DB Commodity Long ETN (NYSEArca: DPU)
- UBS DJ-UBS Commodity ETN (NYSEArca: DJCI)
- Goldman Sachs Connect GSCI ETN (NYSEArca: GSC)
- UBS Bloomberg Constant Maturity Commodity ETN (NYSEArca: UCI)
- US Commodity Funds Commodity Index ETF (NYSEArca: USCI)
- GreenHaven Continuous Commodity Index ETF (NYSEArca: GCC)
- Elements Rogers Commodity ETN (NYSEArca: RJI)
- iShares GSCI Commodity Index Tracking ETF (NYSEArca: GSG)
- Barclay’s iPath Commodity Tracking ETN (NYSEArca: DJP)
- PowerShares Commodity Index Tracking ETF (NYSEArca: DBC)
Fry warned investors of risk factors such as backwardation, commodities performance correlation to the value of the dollar and the credit quality of the issuers of the listed ETNs.
To read Fry’s full perspective on commodities-tracking ETFs, go to TheStreet.com.