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. Especially, 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 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 the indices mentioned. This Investment Guide will help you navigate between the peculiarities of commodity indices that vary substantially in their methodologies and ETFs that track them. 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 31/12/18

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 or [1] current weights as of 31/01/2017

Methodologies of the most important commodity indices

Source: justETF Research; As of 31/01/2017

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 also considered when weighting the index components. Currently, the Bloomberg Commodity index tracks 20 commodities from the energy, precious metals, industrial metals, livestock and agriculture segments.

Methodology of the Bloomberg Commodity Factsheet Methodology

• Broad commodities basket of 20 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 on the 14/07/1998

Further subindices

Bloomberg Commodity (EUR Hedged)
Bloomberg Commodity 3 Month Forward

Commerzbank Commodity (CoCo) ex-Agriculture EW Index

The Commerzbank Commodity (CoCo) ex-Agriculture EW Index tracks the 12 most liquid and important commodities represented in the form of futures contracts. Initially all commodities are equally weighted, reviewed semi-annually.

Methodology of the Commerzbank Commodity (CoCo) ex-Agriculture EW Factsheet Methodology

• Broad commodities basket of 12 components
• Most liquid and important commodities from the energy, industrial metals and precious metals segments
• Semiannual index review and rebalancing
• Roll period is monthly
• All commodities are equally weighted
• The index was introduced on the 27/03/2012

Further subindices

Commerzbank Commodity (CoCo) ex-Agriculture (EUR Hedged)

Rogers International Commodity (RICI) Index

The Rogers International Commodity (RICI) Index is a broad commodities index that tracks 37 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 commodity basket of 37 Rohstoffen
• Index weight 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 introducted in 1998

S&P GSCI© Energy & Metals Capped Commodity 35/20 Index

The S&P GSCI® Energy & Metals Capped Commodity 35/20 Index tracks commodities from the energy and metals sector. The index weight is based on the world production. The largest commodity of the index is capped at 35% and the remaining commodity at 20% on a quarterly basis. This index is a subindex of the well-known S&P GSCI index.

Methodology of the S&P GSCI® Energy & Metals Capped Commodity 35/20 Factsheet Methodology

• Commodities basket of 13 components
• Commodities are selected and weighted by global production
• Annual index review
• Quarterly index rebalancing
• Largest commodity is capped 35% and all other commodities are capped at 20%
• Monthly roll period
• The index was introduced on the 22/09/2009

Thomson Reuters/CoreCommodity CRB Index

The 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, in which they are weighted equally. The first group contains pretroleum products and is capped at 33%. The second group contains seven highly liquid commodities and is capped at 42%. The third group contains four liquid commodities capped at 20% and the last group is capped at 5%.

Methodology of the Thomson Reuters/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 weight is rebalanced on a monthly basis
• Monthly roll period
• The index was introduced on the 03/01/1994

Further subindices

Thomson Reuters/CoreCommodity CRB Non-Energy
Thomson Reuters/CoreCommodity CRB Non-Agriculture and Livestock

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

Further subindices

UBS Bloomberg CMCI (EUR Hedged)
UBS Bloomberg CMCI Ex Agriculture Ex Livestock Capped
UBS Bloomberg CMCI Ex Agriculture Ex Livestock Capped (EUR Hedged)

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 16/01/19

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 31/12/18; Calculations in CHF including dividends