How Efficient was your 2013 Commodity Exposure?

Every month, we see if buying and holding a couple of commodity markets over the course of a year are doing better than investing in the ETF’s that supposedly track them. Typically, the ETF’s underperform a simple strategy of buying the December futures contract and rolling it annually. Well, the numbers are in for the final tally in 2013, and it looks like futures edged out ETF’s on average by a little more than 1%, although there was a wide dispersion of results with the ETF 7% better in the case of Natural Gas and 8.5% worse in the case of Wheat.  (Disclaimer: Past performance is not necessarily indicative of future results).

EFT vs futures 2013(Disclaimer: Past performance is not necessarily indicative of future results)

For many investors, however; the comparison of how to buy commodity exposure is becoming a moot point after reading article upon article  this year about the end of the commodity “Super Cycle.” The problem is the nature of these types of investments , which enable them to make money only when prices rise (and then only after paying the roll yield if there is one). You can see that it wasn’t a profitable venture investing in commodities rising in 2013, with a -12.43% average return over six commodity markets, and a -13.64% average return over six commodity ETF’s nothing to get too excited about.

Which leads us to the widely known secret that many are still unaware of… there’s another way to invest in the commodity market.  It’s a “Long/Short Strategy” which can profit from rising or falling commodity markets, and just happens to be a popular strategy in a subset of the Managed Futures space call Ag Trading.  The BarclayHedge Ag Trader Index tracks these traders, and over the course of 2013, they managed to show a +2.90% return for the year while direct commodity exposure struggled. (Disclaimer: Past performance is not necessarily indicative of future results).

Could next year be different? Absolutely… Ag Traders will have losing months and years just like any other investment, and they may not catch a huge up trend in commodities like the direct exposure will. But better performance when commodities are falling sure seems to make up for any missed upside, in our opinion.

P.S. – Is a  2nd “super-cycle” just around the corner.

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Disclaimer
The performance data displayed herein is compiled from various sources, including BarclayHedge, RCM's own estimates of performance based on account managed by advisors on its books, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.

Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history.

Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.

Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.

Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.

RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.

See the full terms of use and risk disclaimer here.

Disclaimer
The performance data displayed herein is compiled from various sources, including BarclayHedge, RCM's own estimates of performance based on account managed by advisors on its books, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.

Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history.

Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.

Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.

Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.

RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.

See the full terms of use and risk disclaimer here.