Top 10 Best Commodity ETF Plays YTD

February 20, 2014

Commodities of all stripes are showing their muscle so far this year.

A lot was said in 2013 about the end of the commodities super cycle, and yet, so far this year, commodities markets have been rallying across the board.This despite generalized weakness in emerging economies—those markets largely known for their natural resources.

That's because several commodities markets are currently faced with supply/demand imbalances, many linked to an unusually cold winter in the northern hemisphere.

Natural gas prices, for instance, have now risen more than 46 percent year-to-date on the back of a record-breaking winter that has depleted supplies across the U.S. Silver prices, too, have been on the rise—up now nearly 11.5 percent year-to-date—on strong demand.

Precious metals, coffee, and even corn and soybeans—crops that have yet to be planted in the U.S.—are all on the rise as well, as the latest tally of commodities performance at shows.

We list here the top 10 best-performing commodities ETFs and ETNs so far in 2014, in ascending order.

At No. 10, No. 9 and No. 8 there are silver ETPs, with the ETRACS CMCI Silver Total Return ETN (USV | C-46) at No. 10, and which  is up 11.8 percent year-to-date.

USV, which is an ETN, invests in five different futures contracts of varying maturities between three months and two years.

“By using a variety of futures contracts, ranging from 3 months to 2 years in maturity, the note’s daily pattern of returns has little in common with the spot price of the metal,” Analytics said of the ETN. “Furthermore, the futures contracts have recently been in a persistent state of contango, which has led the note to consistently underperform the price of silver.”

Indeed, it currently costs investors about 1.2 percent annualized to roll front-month silver contracts, according to the latest Contango Report. Silver prices are up 11.5 percent so far this year.

USV, backed by UBS, is small at $12 million in assets, and costs 0.40 percent in expense ratio, plus an average trading spread of 72 basis points. That’s puts its cost of ownership at roughly $112 per $10,000 invested a year.  Again, USV is a debt security backed by the creditworthiness of UBS.

Right above USV are the ETFS Physical Silver ETF (SIVR | A-100) and the iShares Silver Trust (SLV | A-99), each up 12.24 percent year-to-date.

Both strategies, unlike USV, are physical silver ETFs.

SIVR tracks the spot price of silver—less holding costs—by holding silver bullion in HSBC vaults, in a trust that has gathered nearly $380 million in assets. It has an all-in cost of roughly 38 basis points a year.

SLV, meanwhile, is the behemoth in the space with nearly $6.9 billion in assets, even though its all-in cost clocks in around 55 basis points a year—slightly higher than SIVR’s.  Like SIVR, SLV also hold physical silver in London vaults.

iShares Silver Trust


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