Commodity ETFs burst onto the scene a few years ago, as these products democratized an asset class that was once difficult to reach for many retail investors. Now, these products are among the most traded in the ETF space and are often coveted for the volatility and potential returns that they provide. This year saw no shortage of big movements in the commodity ETF world, as these products jumped across the board. Below, we outline the best and worst commodity funds on the year to give you a better idea of which segments outperformed, and which ones lagged behind [for more ETF news and analysis subscribe to our free newsletter].
The Best: Metals and Agriculture Dominate
This year is making a run at the warmest year in U.S. history, and the bone-dry drought that struck much of the nation this summer led to agricultural commodities surging and holding onto strong gains for the remainder of the year. A number of metal ETFs were among the best performers as well given the economic improvement this year.
- Dow Jones-UBS Tin Total Return Sub-Index ETN (JJT): Though the tin ETN has just over $6 million in assets, its 2012 performance speaks for itself as the fund has jumped a healthy 22.5% on the year. With global economies picking up this year, the demand and use for this commodity has risen, allowing JJT to profit [see also Everything You Need To Know About Commodity ETFs].
- United States Gasoline Fund (UGA): The year’s top energy performer was the gasoline ETF, which maintains exposure to front-month RBOB gasoline futures. Despite crude oil’s woes for 2012, this ETF jumped over 19.9% on the year. Note that despite gas prices tumbling, UGA has had a strong December.
- Pure Beta Grains ETN (WEET): WEET tracks an index that is comprised of a basket of grains futures in an attempt to mitigate the impact of contango. The strategy has worked beautifully this year, as WEET comes in as a top performer, jumping just over 18% for the year.
The Worst: Softs Take a Hit
While ag as a whole had a good year, the softs sector had a number of the worst-performing products as these four volatile commodities lived up to their reputation for the year.
- The Dow Jones-UBS Coffee ETN (JO): A chart of JO reveals a downhill slope that began in early 2011 and has yet to let up. The ETN has lost more than 43% this year and is showing no signs of turning things around soon. If you are looking to find a beaten-down fund for the coming year, JO will certainly be a candidate, but it is impossible to predict when the fund will return to prosperity [see also 50 Ways To Invest In Agriculture].
- United States Natural Gas Fund (UNG): No surprise here. UNG has not only been one of the worst performing commodity ETFs of all time, but is one of of the worst performing ETFs period. The fund shaved off another 24% this year as warm weather kept pressure on NG prices. Despite the fund’s woes, it continues to maintain more than $1.2 billion in assets and trades more than eight million shares each day.
- Dow Jones-UBS Softs Total Return Sub-Index ETN (JJS): Not surprisingly, this broad softs ETN took a hit. Sugar and coffee both turned in tough years, dragging down a fund that only has three holdings to begin with. JJS lost just under 24% in 2012.
Follow me on Twitter @JaredCummans
Disclosure: No positions at time of writing.