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Anybody care to recommend a good natural resources ETF?
Thinking of swapping out a couple very small holds in mining companies with an ETF having some exposure to mining - but also more broadly diversified into agriculture, real estate and energy. The miners have done very well. Might be time to go conservative. Low fees & broad diversification important. Have enough mutual funds in the real assets area. Need an easy to trade ETF. Appreciate any recommendations.
I had a hard time finding one "do eveything fund" Most focus on futures or energy, or follow a broad index, usually overweight energy.
I looked at most of the Agriculture ETFs and decided that MOO was best diversified stock focused Agriculture ETF. There are many ETFs that buy ag futures but I use DBA.
XME has 41% steel, 17% Coal 13% Gold 10% diversified mining 9% aluminum 5% Silver and 5% Copper RTM is equal weight Basic Materials but has some consumer stocks as well
GRHAX focuses on Natural resources but depending on the manger's outlook can become heavily invested in certain sectors. Currently 65% in energy mostly oil and gas. I don't think it is available at Fido. There I have some of wife's money in DNLAX, although the portfolio managers changed in 2020. They try to predict what commodity/ economic cycle is coming up an weight accordingly.
I don't think this is exactly what you are looking for, but I hope it helps.
Thanks guys. Actually, for my needs, GRES looks attractive with a .30% management fee. But I’ve tried a number of their other low cost “IQ” funds (New York Life Investments) and they’ve proven utter losers - yet they look so good on paper. I downloaded this one’s holdings and it is extremely well diversified across the resource sectors. ISTM it would be hard for them to muck something like that up. Mainly looking for an easy way to add risk and pull it off the table when desired, not necessarily make a lot of money.
Yes, pulling up the holdings in RAAX looks promising. Nicely diversified using sector ETFs. That it was pretty much flat in 2022 is a plus. Not looking for hottest thing on the block. I wonder what the real % in precious metals is. Shows 8% in a gold fund. However, it’s likely some of the other holdings (commodities / real assets) also harbor lesser amounts of PMs.
PDBC (one from @yogibearbull) is from Invesco. Appears to use derivatives to play in commodities. Haven’t checked it out fully, but is reported to be low volatility. COMT also uses derivatives. Sounds like a quantitative approach using algorithms - perhaps partially momentum driven.
@hank, only the precious metal funds may own physical commodities. Most other commodity funds use futures for commodity exposures, and some may be leveraged via futures (i.e. more than 100% exposure).
My short list included those funds that select 10-15 best trending commodities from a pool of 20-25 commodities. Many other commodity funds may sound general in name but may have heavy concentrations in energy or ags.
@hank, only the precious metal funds may own physical commodities.
Thanks. Guessing it’s a SEC limitation? I hadn’t thought about it, but any I’ve ever owned were based on derivatives. And I remember riding one into the ground at Oppenheimer during the last commodities bear market. The #**# thing (QRAAX) crashed and burned. Was finally shut down after 20 years in existence.
@hank, I don’t have consistent results from several natural resource funds.
However, I use an actively managed commodity futures ETF, COM. COM have quite well in last several year. I recalled it was recommended by @lynnbolin on this board. COM has the flexibility to go ‘long’ or ‘flat’ on a number of oil, gasoline, industrial metals precious metals, agricultural products, and livestock. https://markets.ft.com/data/etfs/tearsheet/performance?s=COM:PCQ:USD Overall, I found COM to be much less volatile in stress time and being in the right sectors more often than not. The active management part does work! YTD return is over 10% while DBC is down -2%.
@hank, only the precious metal funds may own physical commodities.
Thanks. Guessing it’s a SEC limitation?
My impression is that this is more of a pragmatic limitation than a legal one. There are certainly additional legal constraints on owning physical commodities, e.g. the fund may have to be structured as a grantor trust. That's surmountable. The reason that one does not find physical commodities in funds is that a fund does not want to take ownership of most physical things.
Here's part of a 2006 Morgan Stanley piece on commodity ETFs:
The following is an excerpt from our August 22, 2006 report, Six ETFs Provide Exposure to Commodity Markets.
Six ETFs provide commodity exposure in one of two ways. The relatively low cost of storing a bar of gold enables the streetTRACKS Gold Trust (GLD) and the iShares COMEX Gold Trust (IAU) to invest in and store physical gold bullion. The same is true for iShares Silver Trust (SLV), which invests in silver bullion. However, it is less practical to store oil, industrial metals and perishable agricultural products or livestock. As a result, the iShares GSCI Commodity-Indexed Trust (GSG), which tracks an index of 24 commodities, the PowerShares DC Commodity Index Tracking Fund (DBC), which tracks an index of six commodities, and the United States Oil Fund (USO), which provides exposure to oil, utilize the futures markets to track their benchmark indices.
I don't think it's any easier today for a fund to corral heads of steer than it was in 2006
Good point. You’d need some pretty high boots I suppose.
Casks of single malt wouldn’t appear too hard to store. Price and quality increase with age. For example, a 15-year old tastes better and sells for more than a 10-year.
I find GLTR interesting. From my reading it’s non-traditional among the precious metals funds in that it uses derivatives rather than physically holding the metals. Also spreads the risk across 4 different precious metals, though predominantly invested in gold.
Thanks for all the ideas. Big help. @sma3 - Nice write up. I was slow in noticing the ETFs you tossed out, but picked them up on second look. RTM has certainly been hot. Some resource funds do include consumers staples - to buffer the volatility from materials probably. I guess the thinking there is that a food processor / distributor is an indirect play on agriculture.
I hoped WSKY was the ticket for single malts, and if they liquidated ( which they eventually did for lack of interest) they would pay me in liquid assets, but no.
I have spent some time looking at ETFs that are plays on the EV and climate change "revolutions" along with commodities and resources that will become more expensive with climate change. There are a lot of ETFs investing in metal futures that will be necessary for EVs, like Lithium, Copper rare earths etc. You would think they would take off like rockets, but the general decline in commodities, with increased recession fears has crushed many of them, but others like Silver are up 25% in six months.
Jeremy Grantham had a long piece years ago, predicting dramatic increases in price of food and agricultural products for a number of reasons. I started looking at commodities back then, but it was pretty early. After a bump from the war in Ukraine, agricultural commodities have been relatively flat, but not down like the metals.
It is hard for individual investors like us to make sense of this, without "inside" knowledge, and I am not sure that even the actively managed funds have this kind of expertise. Who would predict that bird flu would kill mostly egg laying chickens, rather than birds raised for meat?
I think it makes sense to own a variety of funds with different focus, in addition to a general commodity fund. COM has been mentioned here before and so far seems less volatile than most.
”Jeremy Grantham had a long piece years ago, predicting dramatic increases in price of food and agricultural products for a number of reasons.”
Yep - I’ve been thinking that way. But most of this stuff has really run up in price the past several years. I’d be cautious at this point.
Spent hours looking at possibilities. Nothing stood out as a bargain. In the end, decided to sell just the silver miner. Replaced it with a CEF that monkeys around in the precious metals / commodities sectors. The second one (an industrial metals miner) appears on closer examination to be reasonably priced. So hung on to it. With a pair of largely speculative holdings like this I try to keep them in balance. If one runs out ahead, clip some and add to the other. Reduces risk to a degree. When both are falling together it’s time to move from single malt to blended.
My 2-cents worth …
- RAAX looks like an excellent longer term hold if somebody wants exposure to natural resources (notwithstanding valuations are rich). Actively managed. Appears to alter its allocation to various VanEck and non-house ETFs based on a proprietary formula. Appears heavily weighted to gold / precious metals at present. The .87% management fee is quite high as ETFs go. For a substantial portfolio spot, however, I’d prefer something passively managed and tied to an index. With volatile assets like this I think it’s better to be widely spread out and not have a manager trying to second guess which way markets will move. But longer term I’m confident they will do a fine job with the fund.
- Looked long and hard at GRES. Morningstar rates it “gold”, but notes the IQ management team isn’t the best. What I like is the broad diversification across a wide spectrum of the natural resources markets. Few if any holdings reach or exceed 2% of portfolio. Timber and Ag are included, though you wouldn’t know it from M*’s description. It’s passively managed, sticking to a proprietary index and rebalancing quarterly. The .30% ER is excellent. What concerns me is the low AUM which Fido puts at $37 mil. One wonders how long it will survive. The other concern is that within the past few years the index it adheres to and methodology were both modified for reasons unknown. Plus, as I’ve mentioned before, I tried a couple other funds of theirs and was disappointed.
Comments
I looked at most of the Agriculture ETFs and decided that MOO was best diversified stock focused Agriculture ETF. There are many ETFs that buy ag futures but I use DBA.
XME has 41% steel, 17% Coal 13% Gold 10% diversified mining 9% aluminum 5% Silver and 5% Copper
RTM is equal weight Basic Materials but has some consumer stocks as well
GRHAX focuses on Natural resources but depending on the manger's outlook can become heavily invested in certain sectors. Currently 65% in energy mostly oil and gas. I don't think it is available at Fido. There I have some of wife's money in DNLAX, although the portfolio managers changed in 2020. They try to predict what commodity/ economic cycle is coming up an weight accordingly.
I don't think this is exactly what you are looking for, but I hope it helps.
Other suggestions welcome.
PDBC (one from @yogibearbull) is from Invesco. Appears to use derivatives to play in commodities. Haven’t checked it out fully, but is reported to be low volatility. COMT also uses derivatives. Sounds like a quantitative approach using algorithms - perhaps partially momentum driven.
My short list included those funds that select 10-15 best trending commodities from a pool of 20-25 commodities. Many other commodity funds may sound general in name but may have heavy concentrations in energy or ags.
However, I use an actively managed commodity futures ETF, COM. COM have quite well in last several year. I recalled it was recommended by @lynnbolin on this board. COM has the flexibility to go ‘long’ or ‘flat’ on a number of oil, gasoline, industrial metals precious metals, agricultural products, and livestock.
https://markets.ft.com/data/etfs/tearsheet/performance?s=COM:PCQ:USD
Overall, I found COM to be much less volatile in stress time and being in the right sectors more often than not. The active management part does work! YTD return is over 10% while DBC is down -2%.
Here's part of a 2006 Morgan Stanley piece on commodity ETFs: https://dirtyresearch.files.wordpress.com/2006/11/ms200611etfquarterly.pdf
I don't think it's any easier today for a fund to corral heads of steer than it was in 2006
Casks of single malt wouldn’t appear too hard to store. Price and quality increase with age. For example, a 15-year old tastes better and sells for more than a 10-year.
I find GLTR interesting. From my reading it’s non-traditional among the precious metals funds in that it uses derivatives rather than physically holding the metals. Also spreads the risk across 4 different precious metals, though predominantly invested in gold.
I hoped WSKY was the ticket for single malts, and if they liquidated ( which they eventually did for lack of interest) they would pay me in liquid assets, but no.
I have spent some time looking at ETFs that are plays on the EV and climate change "revolutions" along with commodities and resources that will become more expensive with climate change. There are a lot of ETFs investing in metal futures that will be necessary for EVs, like Lithium, Copper rare earths etc. You would think they would take off like rockets, but the general decline in commodities, with increased recession fears has crushed many of them, but others like Silver are up 25% in six months.
Jeremy Grantham had a long piece years ago, predicting dramatic increases in price of food and agricultural products for a number of reasons. I started looking at commodities back then, but it was pretty early. After a bump from the war in Ukraine, agricultural commodities have been relatively flat, but not down like the metals.
It is hard for individual investors like us to make sense of this, without "inside" knowledge, and I am not sure that even the actively managed funds have this kind of expertise. Who would predict that bird flu would kill mostly egg laying chickens, rather than birds raised for meat?
I think it makes sense to own a variety of funds with different focus, in addition to a general commodity fund. COM has been mentioned here before and so far seems less volatile than most.
Yep - I’ve been thinking that way. But most of this stuff has really run up in price the past several years. I’d be cautious at this point.
Spent hours looking at possibilities. Nothing stood out as a bargain. In the end, decided to sell just the silver miner. Replaced it with a CEF that monkeys around in the precious metals / commodities sectors. The second one (an industrial metals miner) appears on closer examination to be reasonably priced. So hung on to it. With a pair of largely speculative holdings like this I try to keep them in balance. If one runs out ahead, clip some and add to the other. Reduces risk to a degree. When both are falling together it’s time to move from single malt to blended.
My 2-cents worth …
- RAAX looks like an excellent longer term hold if somebody wants exposure to natural resources (notwithstanding valuations are rich). Actively managed. Appears to alter its allocation to various VanEck and non-house ETFs based on a proprietary formula. Appears heavily weighted to gold / precious metals at present. The .87% management fee is quite high as ETFs go. For a substantial portfolio spot, however, I’d prefer something passively managed and tied to an index. With volatile assets like this I think it’s better to be widely spread out and not have a manager trying to second guess which way markets will move. But longer term I’m confident they will do a fine job with the fund.
- Looked long and hard at GRES. Morningstar rates it “gold”, but notes the IQ management team isn’t the best. What I like is the broad diversification across a wide spectrum of the natural resources markets. Few if any holdings reach or exceed 2% of portfolio. Timber and Ag are included, though you wouldn’t know it from M*’s description. It’s passively managed, sticking to a proprietary index and rebalancing quarterly. The .30% ER is excellent. What concerns me is the low AUM which Fido puts at $37 mil. One wonders how long it will survive. The other concern is that within the past few years the index it adheres to and methodology were both modified for reasons unknown. Plus, as I’ve mentioned before, I tried a couple other funds of theirs and was disappointed.