A look at three major commodity index ETFs

Commodities 6 minutes to read

Ole Hansen

Head of Commodity Strategy

Summary:  Investors looking to add exposure to commodities in 2019 will likely consider a few key indices, tracked by several ETFs.


Three major indices – the S&P GSCI index, the Bloomberg Commodity index and DBIQ Optimum Yield Diversified Commodity Index – have become the industry-standard benchmarks for investors in commodities. 

Investors either invest directly into the funds or through exchange-traded funds that track their performances. Furthermore, many local commodity fund offerings track one of the three commodity funds.

Different structures and strategy

The S&P GSCI, established in 1991, is an index calculated primarily on a world production-weighted basis. It comprises 24 physical commodities that are the subject of active, liquid futures markets. 

The weight of each commodity in this index is determined by the average quantity of production and is designed to reflect the relative significance of each of the included commodities in the world economy. 

Due to this structure, the S&P GSCI is very heavily exposed towards the energy sector, with 59% of the index currently invested in products ranging from crude oil to natural gas.
Source: Bloomberg, Saxo Bank
The Bloomberg Commodity Index (BCOM), previously called the DJ-UBSCI, was established in 1998 and has a more diversified approach. This index comprises 22 physical commodities, all represented by active futures markets. 

No single commodity can comprise less than 2% or more than 15% of the index and no group or sector can represent more than 33%. 

The weightings for each commodity included are calculated in accordance with rules designed to ensure that the relative proportion of each of the underlying individual commodities reflects its global economic significance and market liquidity. 

The DBIQ Optimum Yield Diversified Commodity Index Excess Return is a rules-based index composed of futures contracts on 14 of the most heavily-traded and important physical commodities in the world.
ETF information
The year-to-date performances show how the energy-heavy GSG led the other two until October when crude oil began its collapse. The DJP struggled from June and onwards as the US-China trade war hit grains and copper. 
Source: Bloomberg, Saxo Bank
Disclaimer

Saxo Capital Markets (Australia) Pty Ltd prepares and distributes information/research produced within the Saxo Bank Group for informational purposes only. In addition to the disclaimer below, if any general advice is provided, such advice does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of trading any financial instrument as trading can result in losses that exceed your initial investment. Please refer to our Analysis Disclaimer, and our Combined Financial Services Guide and Product Disclosure Statement. All legal documentation and disclaimers can be found at https://www.home.saxo/en-au/legal/.

The Saxo Bank Group entities each provide execution-only service. Access and use of Saxo News & Research and any Saxo Bank Group website are subject to (i) the Terms of Use; (ii) the full Disclaimer; and (iii) the Risk Warning in addition (where relevant) to the terms governing the use of the website of a member of the Saxo Bank Group.

Saxo News & Research is provided for informational purposes, does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. No Saxo Bank Group entity shall be liable for any losses that you may sustain as a result of any investment decision made in reliance on information on Saxo News & Research.

To the extent that any content is construed as investment research, such content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication.

Please read our disclaimers:
- Full Disclaimer (https://www.home.saxo/en-au/legal/disclaimer/saxo-disclaimer)
- Analysis Disclaimer (https://www.home.saxo/en-au/legal/analysis-disclaimer/saxo-analysis-disclaimer)
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)

Saxo Capital Markets (Australia) Pty Ltd.
Level 25, 2 Park Street
NSW 2000
Sydney
Australia

Australia

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-au/about-us/awards

Saxo Capital Markets (Australia) Pty Ltd ABN 32 110 128 286 AFSL 280372 (‘Saxo’ or ‘Saxo Capital Markets’) is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms & Combined Financial Services Guide & Product Disclosure Statement to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products such as CFDs and Margin FX products may result in your losses surpassing your initial deposits. Saxo Capital Markets does not provide ‘personal’ financial product advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Capital Markets does not take into account an individual’s needs, objectives or financial situation.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website is not intended for residents of the United States and Japan.
Please click here to view our full disclaimer.