Head of Commodity Strategy
At first glance, broad commodity ETFs may appear interchangeable. They all promise exposure to “commodities” and are often used as portfolio diversifiers or inflation hedges. However, recent performance differences highlight a more important reality: the choice of index matters just as much as the decision to invest in commodities in the first place.
Two of the most widely followed benchmarks are the Bloomberg Commodity Index (tracked by funds such as CMOD) and the S&P GSCI. The latter is not currently available for trading by most non-US brokers, including on the Saxo platform, due to PTP (Publicly Traded Partnership) rules—U.S. tax requirements (e.g., K-1 reporting and withholding) that often lead platforms to restrict access for non-U.S. investors. The reference here is therefore for comparison and educational purposes, highlighting the dynamics that drive differences in ETF performance. While both offer diversified commodity exposure, their construction differs significantly - and those differences have become decisive in recent years.This means returns are driven by three components:
spot return: the change in the underlying commodity price
roll return: the gain or loss from replacing an expiring futures contract with a new one
collateral return: interest earned on the cash backing the position
For most investors, the key unfamiliar element is the roll return, which depends on the shape of the futures curve.
When markets are in backwardation (near-term prices higher than future prices), rolling generates a positive return
When markets are in contango (future prices higher than near-term), rolling creates a drag on performance
By contrast, the S&P GSCI is production-weighted, meaning commodities with higher global output receive larger weights. This results in a much heavier allocation to energy, with around 48.2% exposure excluding natural gas, while metals carry significantly smaller weights.
Over the past five years, commodity markets have experienced two major energy shocks: the first in 2022 following Russia’s invasion of Ukraine, and the current disruption linked to Middle East war and disruptions of flows through the Strait of Hormuz.
These events have had an outsized impact on index performance. With its heavier energy allocation, the S&P GSCI has captured more of these price spikes, during the past five years rising 126% while the the BCOM has trailed at 86%. This outperformance is not due to broader commodity strength alone. Rather, it reflects the dominance of energy in driving returns during periods of supply disruption. In 2022 the BCOM returned 16% while the S&P GSCI rose 26%, while this year so far the BCOM trades up 20.7% while the SP GSCI has returned 31.7%.
Beyond spot price gains, energy markets are currently delivering an additional boost through extreme backwardation. When supply is tight as it is right now across the energy sector, near-term contracts trade at an elevated premium to future ones. Investors rolling their positions benefit from selling high and buying lower-priced deferred contracts, generating a positive roll yield.
Current one-year backwardation levels highlight the strength of this effect:
Brent crude: +23.3%, meaning that, at an unchanged spot price an investor could capture this return over a year from rolling exposure along the futures curve.
WTI crude: +19.3%
Gas oil (diesel): +34.0%
This creates a powerful tailwind for energy-heavy indices such as the S&P GSCI.
By contrast, metals markets tend to exhibit contango, reflecting storage, financing, and insurance costs:
Gold: -4.4%
Silver: -3.9%
Copper: -5.4%
Even when metal prices rise, these negative carry effects can reduce total returns for passive investors. This helps explain why a metals-heavy index like BCOM has struggled to keep pace despite strong precious metals performance in recent years.
On a one-year basis, the performance gap between the two indices has been narrower, reflecting a period where metals—particularly gold and silver—initially outperformed. However, the recent resurgence in energy has shifted the balance once again, and while the BCOM has returned a very respectable 29% return the GSG has done even better at 35.6%. This highlights how quickly leadership can change depending on which sector drives the commodity cycle.
The key lesson is that commodity ETFs are not neutral exposures. Choosing between them is effectively a decision about which part of the commodity market one wants to emphasize.
Investors seeking broad diversification and significant exposure to metals and agriculture may prefer BCOM-linked products such as CMOD
Investors looking to benefit from energy-driven cycles and tight supply conditions may favour S&P GSCI-linked funds
Crucially, the current environment—characterised by tight energy markets and strong backwardation—favours the latter.
Commodities are often treated as a single asset class, but index construction reveals a more nuanced reality. In periods of energy stress, a production-weighted index like the S&P GSCI can significantly outperform, not only due to rising prices but also because of favourable futures curve dynamics. Conversely, in more balanced or metals-led environments, the Bloomberg Commodity Index may offer a steadier and more diversified return profile. In commodities, passive investing is not passive positioning. The benchmark you choose determines how that exposure behaves—but not whether the exposure itself makes sense.
That said, we believe the more important question for investors today is whether commodities deserve a place in portfolios at all—and the answer increasingly looks like yes. The long-term investment case remains supported by a combination of structural forces: deglobalisation, rising defence spending, de-dollarisation, decarbonisation and currency debasement. These are reinforced by rising power demand, population growth, climate pressures and years of underinvestment by producers, all of which point towards tighter supply conditions over time.
From its pandemic low in 2020, the Bloomberg Commodities Index has risen around 160%, a strong recovery but still modest compared with previous supercycles. During the 1970s, the index rose around 700%, while the late 1990s to 2008 cycle—driven by the industrialisation of China and India—delivered gains of more than 450%. Against that backdrop, the current cycle may still be in its early to mid stages rather than approaching exhaustion.
Ultimately, while index selection determines the path of returns, the primary decision is whether to allocate to commodities at all—and current macro and structural trends argue that maintaining exposure continues to make strategic sense.
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