The three top-performing commodity funds have risen as much as 47% in the past year by offering exposure to energy prices as oil remains at its highest in eight years.
They are the U.S. Gasoline Fund, the U.S States Brent Oil Fund, and the Invesco DB Energy Fund, which targets futures contracts commodities including crude oil, natural gas, gasoline, and heating oil. The ETFs provide exposure to physical commodities, not commodity-producing companies.
Key Takeaways
- The three best commodities funds, ranked by one-year trailing total return, are the U.S. Gasoline Fund, the U.S. Brent Oil Fund, and the Invesco DB Energy Fund.
- All three funds have risen at least twice as fast as a key commodities index in the past year while also outperforming the broader market.
- The first ETF holds gasoline-related futures contracts, the second holds crude oil futures, and the third holds a mix of oil and gas futures.
Some 50 commodities ETFs trade in the U.S., excluding inverse and leveraged funds as well as those with less than $50 million in assets under management (AUM). The leading ETFs have outperformed the S&P 500 Index's drop of 19% in the last year as well as the 19% gains of the Dow Jones Commodity Index, as of Nov. 9. While some commodities prices, such as oil and gas, are down from highs earlier in 2022, the Chinese government's recent easing of COVID restrictions in the world's second-largest economy has boosted prices again.
We examine the top three commodities ETFs below. All numbers below are as of Nov. 10.
United States Gasoline Fund LP (UGA)
- Performance Over One Year: 47.0%
- Expense Ratio: 0.96%
- Annual Dividend Yield: N/A
- Three-Month Average Daily Volume: 53,889
- Assets Under Management: $108.6 million
- Inception Date: Feb. 26, 2008
- Issuer: Marygold Cos, Inc.
UGA is structured as a commodity pool, a private investment structure that groups investor contributions in order to trade futures and options in commodities. It's designed to track the movements of gasoline prices. The ETF offers investors a way to bet on a rise in gasoline prices by investing in futures contracts onreformulated gasoline blendstock for oxygen blending (RBOB) and other gasoline-related futures. The fund may also invest inforwardsandswapcontracts. It provides investors with a way to implement a short-term tactical tilt toward a specific segment of the energy market and isn't likely to appeal to those building a long-term,buy-and-holdportfolio.
United States Brent Oil Fund (BNO)
- Performance Over One Year: 39.1%
- Expense Ratio: 1.09%
- Annual Dividend Yield: N/A
- Three-Month Average Daily Volume: 407,155
- Assets Under Management: $270.7 million
- Inception Date: June 10, 2010
- Issuer: Marygold Cos, Inc.
BNO is also structured as a commodity pool. BNO's aim is that daily percentage changes in its shares' net asset value (NAV) are mirrored in fluctuations in the spot price of Brent Crude oil. That price is measured by movements in the price of the BNO's Benchmark Oil Futures Contract. The ETF's benchmark is a near-month futures contract traded on the ICE Futures Exchange. Because Brent Crude often trades at a different price from West Texas Intermediate (WTI), BNO can be a useful way of gaining alternative exposure. Its primary holdings are Brent Crude oil futures contracts. BNO may also invest in forwards and swap contracts.
Invesco DB Energy Fund (DBE)
- Performance Over One Year: 38.4%
- Expense Ratio: 0.77%
- Annual Dividend Yield: N/A
- Three-Month Average Daily Volume: 142,442
- Assets Under Management: $229.5 million
- Inception Date: Jan. 5, 2007
- Issuer: Invesco
Like the other two funds, DBE is also structured as a commodity pool. It invests in futures contracts of some of the most heavily traded commodities in the world, including light sweet crude oil (WTI), heating oil, Brent crude oil, RBOB gasoline, and natural gas. Its goal is to track changes in the DBIQ Optimum Yield Energy Index Excess Return, which includes futures contracts on heavily traded energy commodities. The fund provides a cost-effective and convenient way for investors to gain exposure to futures of energy commodities. However, it may not be suitable for all investors, as the fund is focused on investments within highly volatile markets.
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