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Commodity ETFs and ETNs

by: SA Editors May 28, 2008 | about stocks: COW / CUT / DBA / DBB / DBC / DBE / DBO / DBP / DBS / DGL / DGP / DGZ / DJP / DZZ / EOH / FUD / FUE / GAZ / GCC / GDX / GLD / GOE / GRU / GSC / GSG / GSP / HAP / IAU / IGE / JJA / JJC / JJE / JJG / JJM / JJN / KOL / LSO / MOO / OIL / PMY / PTD / PTM / RAW / RJA / SLV / UAG / UBC / UBG / UBM / UBN / UCI / UCR / UGA / UHN / UNG / USL / USO / USV    
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Commodity ETFs (exchange-traded funds) and ETNs (exchange-traded notes) List
(click on symbol for data and articles)

Broad Based Commodity ETFs and ETNs
E-TRACS UBS Bloomberg CMCI Index ETN (UCI)
GreenHaven Continuous Commodity Index (GCC)
GS Connect S&P GSCI Enhanced Commodity Total Return Strategy Index ETN (GSC)
iShares GSCI Commodity-Indexed Trust ETF (GSG)
iPath Dow Jones-AIG Commodity Index Total Return ETN (DJP)
iPath S&P GSCI Total Return Index ETN (GSP)
PowerShares DB Commodity Index Tracking Fund ETF (DBC)
Opta Lehman Brothers Commodity Index Pure Beta Total Return ETN (RAW)

Agricultural Commodities ETFs and ETNs
E-TRACS UBS Bloomberg CMCI Agriculture Index ETN (UAG)
E-TRACS UBS Bloomberg CMCI Food Index ETN (FUD)
E-TRACS UBS Bloomberg CMCI Livestock Index ETN (UBC)
iPath Dow Jones AIG-Agriculture ETN (JJA)
iPath Dow Jones AIG-Grains ETN (JJG)
iPath Dow Jones-AIG Livestock Total Return Sub-Index ETN (COW)
MLCX Biofuels Index ELEMENTS ETF (FUE)
MLCX Grains Index ELEMENTS ETF (GRU)
MLCX Livestock ELEMENTS ETN (LSO)
Rogers International Commodity Index – Agriculture ELEMENTS ETN (RJA)
PowerShares DB Agriculture Fund ETF (DBA)
Opta Lehman Brothers Commodity Index Pure Beta Agriculture Total Return ETN (EOH)

Gold, Silver and Metals ETFs and ETNs
DB Gold Double Long ETN (DGP)
DB Gold Double Short ETN (DZZ)
DB Gold Short ETN (DGZ)
E-TRACS UBS Bloomberg CMCI Gold Total Return ETN (UBG)
E-TRACS UBS Bloomberg CMCI Industrial Metals Index ETN (UBM)
E-TRACS UBS Bloomberg CMCI Silver Index ETN (USV)
E-TRACS UBS Long Platinum ETN (PTM)
E-TRACS UBS Short Platinum ETN (PTD)
iPath DJ-AIG Industrial Metals Total Return Sub-Index (JJM)
iPath DJ-AIG Nickel Total Return Sub-Index (JJN)
iShares COMEX Gold Trust ETF (IAU)
iShares Silver Trust ETF (SLV)
MLCX Gold ELEMENTS ETN (GOE)
MLCX Precious Metals ELEMENTS ETN (PMY)
PowerShares DB Gold Fund ETF (DGL)
streetTRACKS Gold Shares ETF (GLD)
PowerShares DB Silver Fund ETF (DBS)
PowerShares DB Precious Metals Fund ETF (DBP)
PowerShares DB Base Metals Fund ETF (DBB)

Oil and Gas ETFs and ETNs
Claymore MACROshares Oil Up Tradeable ETF (UCR)
E-TRACS UBS Bloomberg CMCI Energy Index ETN (UBN)
iPath DJ-AIG Energy Total Return Sub-Index (JJE)
iPath DJ-AIG Natural Gas Total Return Sub-Index (GAZ)
iPath S&P GSCI Crude Oil Total Return Index ETN (OIL)
PowerShares DB Energy Fund ETF (DBE)
PowerShares DB Oil Fund ETF (DBO)
United States Gasoline Fund, LP ETF (UGA)
United States Heating Oil Fund, LP ETF (UHN)
United States Oil Fund, LP ETF (USO)
United States 12 Month Oil Fund, LP ETF (USL)
United States Natural Gas Fund, LP ETF (UNG)

Commodities-Related ETFs
Claymore Global Timber ETF (CUT)
iShares S&P North American Natural Resources Index Fund (IGE)
Van Eck Market Vectors Agribusiness ETF (MOO)
Van Eck Market Vectors Coal ETF (KOL)
Van Eck Market Vectors Gold Miners ETF (GDX)
Van Eck Market Vectors RVE Hard Assets Producers ETF (HAP)

What Are They?

  • Commodity ETFs (exchange traded funds) attempt to track the price of a single commodity, such as gold or oil, or a basket of commodities by holding the actual commodity in storage, or by purchasing futures contracts. Because futures provide leverage (more exposure than the actual cash invested), ETFs that use futures contracts have uninvested cash, which they usually park in interest-bearing government bonds. The interest on the bonds is used to cover the expenses of the ETF and to pay dividends to the holders.
  • Commodity ETNs (exchange traded notes) are non-interest paying debt instruments whose price fluctuates (by contractual commitment) with an underlying commodities index. Because they are debt obligations, ETNs are subject to the solvency of the issuer.
  • Commodities-related ETFs generally track the producers of commodities, such as mining companies. While the financial performance of those companies -- and thus their stocks -- may be highly leveraged to the underlying commodity, other factors can impact the profitability of production. The ETFs, therefore, may not reflect the performance of the underlying commodity. For example, gold miners are highly leveraged to the discovery of gold deposits, exchange rates and their relationships with the countries where gold deposits are found.

Why & How To Use Them

  • Commodities are a separate asset class from stocks and bonds, so they provide extra diversification in a portfolio.
  • The case for commodities: The industrialization of the China and India and the integration of Russia and Eastern Europe into the global economy are boosting demand for commodities, driving up prices. Many people believe that this will result in a long term uptrend ("super cycle") in commodity prices.
  • The case against commodities: In contrast to stocks and bonds, commodities are not income generating. So ownership of commodities, including via ETFs or ETNs, is a pure bet on prices. And the expenses charged by the ETF and ETN providers and in the cost of storing hard assets or trading futures eat away at the underlying value of the fund.
  • Commodity ETFs and ETNs can also be used as a hedge. For example, if you consume a large amount of gasoline and heating fuel and are concerned about the impact on your income of a rise in oil and gas prices, buying an oil and gas ETF can help offset your exposure.

What to Look Out For

  • Commodities ETFs that use futures have diverged significantly from the price of the hard commodities themselves. ETNs, in contrast, track the price of the commodity closely. See the articles in the Further Reading section below.
  • There are dramatic differences in structure of these ETFs and ETNs, even for the same commodities, leading to potential differences in performance and tax treatment.
  • ETFs and ETNs are treated differently for taxation purposes. Current opinion is that all gains on ETNs held for longer than one year are treated as long-term capital gains, whereas an investor owning a futures-based ETF is taxed on any capital gains on the underlying futures held by the fund using the taxation convention for futures, ie. at a hybrid rate of 60% long-term, 40% short-term each year on all gains, even if the investor doesn't sell the fund. (Check this carefully with your accountant.)

Further Reading

This page is part of The Seeking Alpha ETF Selector which sorts ETFs by type, highlights how to use them and what to look out for, and provides links to articles that discuss key issues for investors.

Related Articles

This article has 19 comments:

  •  
    Jun 02 05:54 PM
    Given the problems with futures-based ETFs, isn't it a no-brainer to use the iPath ETNs instead? Does anyone know of any drawback of them?
    Reply
  •  
    Jun 03 10:38 AM
    any reason you did not list GLD in your Gold, Silver and Metals ETFs? ... is the biggest ...
    Thanks, Herb
    Reply
  •  
    Jun 03 12:02 PM
    Thanks Herb! Not sure how we missed it out, but we've added it now.
    Reply
  •  
    Dec 07 04:01 PM
    What about Elements exchange traded notes (ETNs)?
    Reply
  •  
    Dec 07 04:02 PM
    Sorry, that should be www.elementsetn.com
    A copy of their prospectus can be found at www.elementsetn.com/pd...
    Reply
  •  
    Feb 06 03:23 PM
    Additions: CEF under Gold/Silver, and COW under Agriculture.
    Reply
  •  
    Feb 09 05:36 PM
    In addition to the elements etn's (RJA), there are also two iPath ag ETFs. They are JJG and JJA. One is for grains, the other for all agriculture. Bet you can't guess which is which. :)
    Of the various ag ETFs available, RJA (Jim Rogers, the famous uber commodity bull manages this one) and DBA are the most liquid and have the tightest spreads. RJA is still fairly new, but has grown very rapidly to average over 500,000 shares/day.
    Reply
  •  
    Feb 09 05:41 PM
    There are also several agricultural commodity ETFs traded on the london stock exchange. Each one tracks a specific commodity. They are offered through a company called ETF Securities. The also have cool ticker symbols like CATL, HOGS, CORN, COTN, SUGA, SOYB, etc. If you have access to the LSE, check those out also. They are not as new as some of the recent American additions, so they tend to be very liquid.
    Reply
  •  
    Feb 09 05:44 PM
    Each of these ag ETFs contains a different basket of commodities, so make sure you check on each and know what the contain. The Jim Rogers one is the broadest (contains the most commodities), and Elements claims that his index has the best returns also. Do you homework on each one!
    Reply
  •  
    Feb 16 04:48 PM
    Thanks for the comments. We've updated the list, and expanded it to include the commodities-related ETFs as well.

    We haven't included CEF as this list doesn't include closed-end funds.

    Let me know if there are more to add.
    Reply
  •  
    Feb 26 02:17 PM
    We added the United States Gasoline Fund, LP (UGA) which started trading today.
    Reply
  •  
    Mar 09 08:47 AM
    Update: we just added a link to Murray Coleman's article on the new Gasoline ETF to the "Further Reading" section.
    Reply
  •  
    Apr 10 08:05 AM
    Update: we just added the United States Heating Oil Fund, LP ETF (UHN) which started trading yesterday.

    Article about it here:
    seekingalpha.com/artic...
    Reply
  •  
    Apr 13 10:23 AM
    Update: We just added the following to the list:
    MLCX Precious Metals ELEMENTS ETN (PMY)
    MLCX Livestock ELEMENTS ETN (LSO)
    MLCX Gold ELEMENTS ETN (GOE)
    UBS E-TRACS CMCI Gold Total Return ETN (UBG)

    ... and Heather Bell's article about the new ELEMENTS ETNs:
    seekingalpha.com/artic...
    Reply
  •  
    Apr 13 02:36 PM
    Update: we just added the rest of the UBS Bloomberg Constant Maturity Commodity Index [CMCI] ETNs: CMCI Index (UCI), CMCI Agriculture Index (UAG), CMCI Livestock Index (UBC), CMCI Industrial Metals Index (UBM), CMCI Food Index (FUD), CMCI Energy Index (UBN), CMCI Gold Index (UBZ) and CMCI Silver Index (USV). UBZ charges 0.30%, while USV charges 0.40%. The rest of the ETNs charge 0.65%.
    Reply
  •  
    Apr 13 03:40 PM
    Update: we just added the three Deutsche Bank inverse and leveraged gold ETFs:
    DB Gold Double Long ETN (DGP)
    DB Gold Double Short ETN (DZZ)
    DB Gold Short ETN (DGZ)

    Here's an excellent article by Don Dion about leveraged ETFs:
    seekingalpha.com/artic...

    And an earlier, more detailed article on the same topic by Tristan Yates:
    seekingalpha.com/artic...
    Reply
  •  
    May 12 03:40 AM
    Update: We just added the new Platinum long and short ETFs to the list, and re-organized the Further Reading section to make it more informative.
    Reply
  •  
    Aug 08 10:20 PM
    I'm missing RJI, RJN, and RJZ.
    Reply
  •  
    Aug 13 07:29 AM
    Would anyone recommend a livestock ETF or ETN?
    Taxation as US investor...any opinions? (reading prospectus)
    Do these have enough liquidity...I cannot seem to locate avg. volume?
    Looking at:
    CATL, ETFS Live Cattle...trades on London
    COW, iPath Livestock
    Reply
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