The Return Of Commodity ETFs

April 26, 2017

For a while, new commodity ETFs had been a rarity. In 2015, just two commodity ETFs were launched.

They included the WisdomTree Coal ETF (TONS), which closed last year. The second was a commodity ETN targeting the broad commodity market. The ETRACS CMCI Total Return ETN Series B (UCIB) was actually a clone of an existing product that tracks the same index, the ETRACS UBS Bloomberg Constant Maturity Commodity Index TR ETN (UCI).

This wasn’t actually surprising given that the commodity boom had come to an end, with 2015 marking the low point in commodity ETF popularity.

New Commodity ETF Structure

But things started picking up in 2016, with the launch of six commodity ETFs, including three that are actively managed, one of those targeting oil, and three others that also covered the oil market. However, it’s debatable just how “active” the three actively managed ETFs are.

To get around the K-1 tax form requirements, a large chunk of the commodity products launched in the past year or so use a new kind of structure. The commodity futures part of the portfolio—up to 25% of the fund—is managed in an offshore fund and usually tracks an index at least fairly closely.

The collateral, which represents the remainder of the funds, is invested in fixed-income or cashlike vehicles and is actively managed. Depending on how actively this portion is managed, it can result in a few extra basis points of added performance.

Long-Only Returns

This year, the trend has continued and accelerated, with another six long-only commodity ETFs rolling out in just the first three months of the year, four of which implement the “active” K-1-free structure that has become popular.

But it’s not just funds that do away with the K-1 forms that are launching. This year’s ETF rollouts also have included a clone of the broken iPath Bloomberg Natural Gas Subindex Total Return ETN (GAZ), a formerly popular ETN that has been closed for creations since 2009. The new product, the iPath Series B Bloomberg Natural Gas Subindex Total Return ETN (GAZB), unlike its predecessor, is callable, and unlikely to fall victim to zombie status, as GAZ has done.

Another of the newcomer commodity funds is the SPDR Long Dollar Gold Trust (GLDW), which holds physical gold bars in the manner of the well-known SPDR Gold Trust (GLD) but also hedges its exposure with a short position in non-U.S. currencies.

But really, what’s different with this resurgence in commodities is the “new and improved” aspect of the funds that are launching. These are traditional commodity strategies, but they include new features that make them a bit better than the versions that were previously launched.

2017 Long-Only Commodity ETF Launches

Fund Ticker Launch Date AUM (M)
SPDR Long Dollar Gold Trust GLDW 30/01/2017 $27.98
iPath Series B Bloomberg Natural Gas Subindex Total Return ETN GAZB 09/03/2017 $4.26
Direxion Auspice Broad Commodity Strategy ETF COM 30/03/2017 $14.95
ETFS Bloomberg All Commodity Longer Dated K-1 Free Strategy ETF BCD 31/03/2017 $3.69
ETFS Bloomberg Energy Commodity Longer Dated Strategy K-1 Free ETF BEF 31/03/2017 $2.47
ETFS Bloomberg All Commodity Strategy K-1 Free ETF BCI 31/03/2017 $2.45


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