Commodity ETF

How do I invest in a broad commodities basket?

Investing in commodities is considered risky. However, from a diversification perspective it can be interesting to invest in commodities. In particular, the historically negative correlation of commodities to stocks can improve portfolio diversification. A commodities investment is generally realised through an investment in forward or futures contracts. Commodity indices usually track a basket of commodities.

There are several indices available to invest with ETFs in a broad basket of commodities. There are also subindices on single or selected commodity segments, which are usually derived from broad basket indices. This Investment Guide will help you navigate among the peculiarities of the most important commodity indices, which vary substantially in their methodologies. It will allow you to find the most suitable ETFs for you by ranking them according to your preferences.

The best commodity ETF by 1-year fund return as of 30/09/20

All commodity ETFs ranked by fund return

The largest commodity ETF by fund size in CHF

All commodity ETFs ranked by fund size

The cheapest commodity ETF by total expense ratio

All commodity ETFs ranked by total expense ratio

Diversification of the most important commodity indices

Source: justETF Research; Strategic weights of the single commodity segments

Methodologies of the most important commodity indices

Source: justETF Research; As of 31/08/2020

Performance of the commodity indices in comparison

Bloomberg Commodity Index

The Bloomberg Commodity index (previously: Dow Jones UBS Commodity index) is based on the economic significance of the commodities. Besides diversification, continuity and market liquidity are considered when selecting and weighting the index components. Currently, the Bloomberg Commodity index tracks 23 commodities from the energy, precious metals, industrial metals, livestock and agriculture segments.

Methodology of the Bloomberg Commodity Factsheet Methodology

• Broad commodities basket of 23 components
• Commodities are selected by economic significance (production), diversification, continuity and market liquidity
• Annual index review and rebalancing
• Monthly roll period
• Single commodity is capped at 15%
• Commodities segment is capped at 33%
• The index was introduced in 1998

Further subindex

Bloomberg Commodity 3 Month Forward

Rogers International Commodity (RICI) Index

The Rogers International Commodity (RICI) index is a broad commodities index that tracks 38 commodities. The index composition is dependent on the global consumption and liquidity of each commodity and is reviewed by the RICI committee.

Methodology of the Rogers International Commodity (RICI) Factsheet Methodology

• Broad commodities basket of 38 components
• Index is rebalanced on a monthly basis
• Index selection and weighting is reviewed on an annual basis by the RICI committee
• Monthly roll period
• The index was introduced in 1998

Refinitiv/CoreCommodity CRB Index

The Refinitiv/CoreCommodity CRB index (previously: Thomson Reuters/CoreCommodity CRB index) is a broad commodities index that tracks 19 commodities. Dependent on their liquidity, the commodities are segmented into four groups. The first group contains petroleum products and is capped at 33%. The second group contains seven highly liquid commodities (which are equal weighted at 6%) and is capped at 42%. The third group contains four liquid commodities (equal weighted at 5%) capped at 20%. Finally, the last group contains five commodities (equal weighted at 1%) capped at 5%.

Methodology of the Refinitiv/CoreCommodity CRB Factsheet Methodology

• Commodities basket of 19 components
• Commodities are selected by liquidity, global economic significance, correlations of commodity sectors and their contribution to strategic asset allocation
• Annual index review
• Index is rebalanced on a monthly basis
• Monthly roll period
• The index was introduced in 1994

Further subindex

Refinitiv/CoreCommodity CRB Non-Energy

Optimised Roll Commodity Index

The Optimised Roll Commodity index is based on the Bloomberg Commodity index in terms of composition and target weighting of the various commodities. Thus, commodities are selected and weighted according to their economic significance. Diversification, continuity and market liquidity are also taken into account. As the Bloomberg Commodity index, the Optimised Roll Commodity index tracks 23 commodities from the energy, precious metals, industrial metals, livestock and agriculture segments. The Optimised Roll Commodity index aims to outperform the Bloomberg Commodity index over the long term by optimising roll returns. To achieve this, the maturity of new futures contracts is adjusted monthly based on liquidity criteria.

Methodology of the Optimised Roll Commodity Factsheet Methodology

• Broad commodities basket of 23 components
• Index composition and target weights are identical to the Bloomberg Commodity index
• Commodities are selected by economic significance (production), diversification, continuity and market liquidity
• Annual index review and rebalancing
• Maturity of futures contracts is adjusted monthly to optimise roll return
• Single commodity is capped at 15%
• Commodities segment is capped at 33%

UBS Bloomberg CMCI Index

The UBS Bloomberg CMCI index tracks 27 commodities representing five broad sectors including energy, precious metals, base metals, agriculture and livestock. The index diversifies its futures across the maturity curve and thus offers constant maturities. Therewith, the index tries to minimise the risk of a negative roll yield.

Methodology of the UBS Bloomberg CMCI Factsheet Methodology

• Broad commodities basket of 27 components
• Commodities are selected according to economic indicators like CPI, PPI, and GDP. Secondary factor is their market liquidity
• Largest commodity is capped at 35%, all other commodities are capped at 20%
• Constant maturity to reduce the negative roll yield
• Annual index review
• Index is rebalanced on a monthly basis
• Daily roll period
• The index was introduced in 2007

Further subindex

UBS Bloomberg CMCI Ex Agriculture Ex Livestock Capped

When choosing a commodity ETF one should consider several other factors in addition to the methodology of the underlying index and performance of an ETF. For better comparison, you will find a list of all commodity ETFs with details on size, cost, age, income, domicile and replication method ranked by fund size.

Compare all commodity ETFs in detail
Compare all commodity ETFs in a chart

Source: justETF.com; As of 22/10/20

Return comparison of all commodity ETFs

The table shows the returns of all commodity ETFs in comparison. All return figures are including dividends as of month end. Besides the return the reference date on which you conduct the comparison is important. In order to find the best ETFs, you can also perform a chart comparison.

• Cumulative
• Calendar year

Source: justETF.com; As of 30/09/20; Calculations in CHF including dividends