Middle East tensions and OPEC production cuts have driven oil to a six-month high. The price of cocoa has doubled in just the past two months amid a record supply deficit. And gold is at all-time highs as inflation remains stubborn.
Everywhere you look, the prices of commodities are surging—and investors in commodity exchange-traded funds are reaping the rewards.
The United States Oil Fund (USO), for instance, is up 24% year-to-date, while the SPDR Gold Trust (GLD) is higher by 13%.
But investing in individual commodities isn’t for everyone. Commodities are notoriously volatile and getting caught on the wrong side of a commodities trade can be painful.
For investors interested in betting on broader trends in commodities, ETFs focused on multiple commodities are an option.
These broad commodity ETFs have gained upwards of 15% this year, besting the 10% return for the S&P 500.
Top Performers
Among broad commodity ETFs, this year’s biggest return belongs to the GS Connect S&P GSCI Enhanced Commodity TR Strategy Index ETN (GSCE).
The $98 million product tracks the S&P GSCI Enhanced Commodity Total Return Strategy Index, a modified version of the venerable S&P GSCI Index.
According to S&P Global, the enhanced index uses certain “dynamic, timing and seasonal rolling rules” to improve returns.
The larger iShares S&P GSCI-Commodity-Indexed Trust (GSG), with $1.1 billion in AUM, tracks the standard version of the S&P GSCI Index.
It’s up 13.5% this year, the second-best performance among broad commodity ETFs.
Meanwhile, the largest exchange-traded fund in the space, the $5 billion Invesco Optimum Yield Diversified Commodity Strategy No K-1 ETF (PDBC), is lagging with a 7.7% return.
PDBC tracks the DBIQ Optimum Yield Diversified Commodity Index Excess Return.
Differences
Like with stock ETFs, the holdings of broad commodity ETFs can vary substantially.
For instance, PDBC tracks an index with 14 commodities, while GSG tracks one with 24.
Both ETFs hold just over half their portfolio in energy commodities, but PDBC is much more gold and copper heavy versus GSG.
On the other hand, GSG has a small position in cocoa, while PDBC doesn’t own that commodity at all.
To learn more about what broad commodity ETFs are available and what differentiates them, check out etf.com’s Commodities ETFs topics page.
