Commodity ETFs YTD: Solar Funds Shine

September 27, 2013

No single sector survived the first three quarters of 2013 without some damage, but some fared much better than others.

With the third quarter of 2013 nearly behind us, it’s time to take a retrospective look at funds’ performance so far this year, and anticipate how the final quarter will play out.

Commodity ETPS—which invest in everything from cows to natural gas to gold mines and to the physical palladium that’s used to make cars—are an especially telling corner of the ETF universe. These funds tend to be incredibly sensitive not just to movements in the markets, but global tension and the fluctuations of the climate.

The corner of the market that includes commodity funds is a small but growing niche, currently home to almost 260 exchange-traded products. Overall year-to-date performance from that group of ETPs is impressive, but not surprising considering the global atmosphere.

The 10-worst-performing commodity funds so far in 2013, excluding leveraged and inverse funds, were all baskets of gold and silver miners, and the 10-best nonleveraged or inverse commodity ETPs were clean energy funds.

To get a better feel for just how the commodity corner is shaping up in 2013, we examined not only the 10 best and worst overall funds, but the three best and worst ETPs from each commodity sector: agriculture; broad market (multicommodity) baskets; energy; industrial metals and precious metals.

On a sector-by-sector basis, things got pretty interesting. To exclude red herrings, we omitted leverage and inverse products, unless otherwise noted on charts or in writing.

Agriculture funds, which are incredibly sensitive to weather conditions, had a pretty even spread between the worst and best year-to-date performers. The First Trust ISE Water fund (FIW | B-48) led the ag rally with a 21.52 percent YTD spike, and the worst ag fund so far in 2013, the iPath Dow Jones-UBS Coffee Total Return ETN (JO | B-91) has slid 25.63 percent in that same time frame.

Ag Best Worst

However, when shifting sights to broad market baskets, which hold commodity securities and notes from across the commodity spectrum, the picture wasn’t nearly as balanced. Multicommodity baskets have generally underperformed due to performance struggles within the specific sectors.

The best-performing broad market fund is indicative of that; the Market Vectors RVE Hard Assets Producers (HAP | B-88) has risen only 2.11 percent in 2013, while the worst broad market fund, EGShares’ Emerging Markets Metals & Mining fund (EMT | F-49), has fallen 28.38 percent year-to-date.

Broad Market Best Worst

Broad market ETPs can be tricky to measure against each other, and our top and bottom performers here are excellent examples of that. EMT is technically a multicommodity fund because it holds precious and industrial metals securities, as well as coal. However, its holdings are heavily tilted toward steel—nearly 40 percent—and it has a generous 16.7 percent allocation to coal.

HAP, on the other hand, holds a truly diverse basket of commodity securities, allocating 33 percent to oil and gas; 21 percent to metals and mining; 15 percent to chemicals; 9 percent to food and tobacco, among a slew of other allocations.

A heavy allocation toward energy ratcheted HAP to the top of the broad market performance charts, and brings up the next sector to review: energy.

Tensions in the Middle East pushed prices up, especially in the summer months, when travel in the U.S. is at a peak and recreational use of oil increases demand. With the driving season now at an end, and with easing of the Middle East tensions, it’s possible we’ll see a retreat from the steep climb of energy ETPs.

But oil ETFs were not the best performers in the sector, as clean-energy ETFs outperformed. The Guggenheim Solar ETF (TAN | B-35) is up 98.38 percent since the beginning of the year, making it not only the best-performing commodity ETF so far this year, it’s the best-performing ETF period.

Even the “bad” energy ETP performances aren’t too steep year-to-date. The WisdomTree Global Natural Resources fund (GNAT | C-57) fell by just under 9 percent this year, and GNAT’s 33.6 percent allocation to metals and mining likely had a lot to do with the fund’s poor performance.

Energy Best Worst


Industrial metals, which include non-precious metals like steel, iron, copper, nickel and tin, haven’t fared well this year. The Global X Lithium fund (LIT | C-98) outperformed the sector, with a drop of 6.79 percent. The biggest loser in industrial metals belongs to the Global X Copper Miners fund (COPX | C-97), which fell 25 percent.

Industrial Metals Best Worst

Finally, in the spirit of saving the worst for last, precious metals funds “best” performance year-to-date is pretty bad, and the worst is quite terrible. The fact that the 10 worst overall commodity funds belonged to this sector foreshadows how the top and bottom three lined up.

The story of gold in 2013 isn’t a sad one for everyone, though. It’s incredibly interesting to note that the very best and very worst commodity ETPs, if leverage and inverse funds are included in the overall mix, both belong to the precious metals sector. In fact, they’re evil-twin ETFs from Direxion, each taking the opposite bid on daily volatility in the gold market.

The Direxion Daily Gold Miners Bear 3X fund (DUST) is an inverse volatility fund designed to rally when gold miners fall. And rally it has, to the tune of 103.45 percent year-to-date. Its sibling, the Direxion Daily Gold Miners Bull 3X ETF (NUGT) plummeted 90.81 percent during that same time frame.

NUGT decreased in value so drastically that it underwent not one, but two reverse share splits—in April and then July of this year.

In terms of nonleveraged or inverse precious metals funds, the ETFS Physical Palladium ETF (PALL | A-100) has risen 1.55 percent, ringing in as the heaviest gainer of all nonleveraged or inverse precious metals ETPs. The Global X Gold Explorers fund (GLDX | D-25) has tumbled 53.91 percent, weighing in as the worst precious metals and the worst commodity ETF year-to-date.

Precious Metals Best Worst


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