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Shop Around for Commodity Funds

The other day I wrote about a new family of exchange-traded notes from a company called Elements that use indices created by legendary commodities investor Jimmy Rogers.

But anyone looking to get exposure to this asset class has many new exchange-traded products to choose from, so you should not buy from one provider without at least looking at the others.

In that article I made a reference to one of several new commodity iPath ETNs from Barclays Global, a unit of Barclays PLC (BCS) that also sponsors the iShares brand of exchange-traded funds. Barclays has recently expanded its lineup of commodities products in a meaningful way, adding several products that track narrower sectors of the market:

  • iPath DJ AIG Agriculture Total Return Sub Index (JJA)
  • iPath DJ AIG Copper Total Return Sub Index (JJC)
  • iPath DJ AIG Grains Total Return Sub Index (JJG)
  • iPath DJ AIG Energy Total Return Sub Index (JJE)
  • iPath DJ AIG Industrial Metals Total Return Sub Index (JJM)
  • iPath DJ AIG Livestock Total Return Sub Index (COW)
  • iPath DJ AIG Natural Gas Total Return Sub Index (GAZ)
  • iPath DJ AIG Nickel Total Return Sub Index (JJN)

All eight of these ETNs are carved out of the older, broader iPath DJ AIG Commodity Index Total Return ETN (DJP). As ETNs, or exchange-traded notes, they are debt obligations of Barclays Global. That means investors do not actually own the various commodities; instead Barclays is committing to investors that the products will mimic their intended indices, less the 0.75% expense ratio.

Some of the new iPath commodity ETNs are more narrowly focused than their Elements counterparts; JJG tracks just three grains compared with 20 agricultural products in the Elements Linked to Rogers International Commodity Index Agriculture Total Return (RJA).

I made the case for agriculture and so, by extension, grains (in the case of JJG, the fund is allocated 42.6% to soybeans, 35.8% to wheat and 21.6% to corn) and, to some extent, livestock (COW, for instance, consists of 67.9% cattle and 32.1% lean hogs), in last week's article. These sectors have underperformed energy and metals in the past, but that doesn't mean they will in the future.

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