ETF vs. Mutual Fund: Commodity Producers
NEW YORK (TheStreet) -- Two of the most promising options for investors seeking exposure to the world of commodity producers are the Market Vectors-RVE Hard Assets Producer ETF (HAP) and the Fidelity Global Commodities Stock Fund (FFGCX).
Both FFGCX and HAP are relatively new to the investing scene. HAP, the elder of the two, made its first appearance in late August, 2008. A little over a half a year later, in March, 2009, Fidelity's mutual fund option was launched. Though young, both products have managed to gather impressive assets. FFGCX boasts $392 million assets under management while HAP has $100 million.
Based on the Rogers-Van Eck Hard Assets Producers Index, HAP exposes investors to a diverse selection of names hailing from various branches of the commodity industry. The fund's roster is dominated by the top four holdings: Exxon Mobil (XOM), Monsanto (MON), Potash of Saskatchewan (POT) and Deere (DE), which combine for 17% of assets. The portfolio quickly becomes more balanced, however, and in total, HAP's top 10 positions represent less than one-third of its total portfolio.
HAP also lives up to its global title, holding positions in some of the most popular resource producers from around the globe. Russia's Gazprom (OGZPY), Italy's ENI (E) and South Korea's Posco (PKX) all appear in the portfolio.HAP carries a 0.65% expense ratio. Unlike HAP, the Fidelity Global Commodities Stock Mutual Fund has a manager, Joe Wickwire. FFGCX's assets are allocated across three sectors: energy, metals and mining, and agriculture. Many of the firms held by FFGCX to represent these sectors are the same as those in HAP. Top holdings include Monsanto, BHP Billiton (BHP), Exxon Mobil, Syngenta (SYT) and Rio Tinto (RTP). Together, FFGCX's top ten positions account for less than 30% of the fund's total portfolio. Typical of mutual funds, FFCGX's expense ratio is considerably higher than its ETF competitor. Investors are charged 1.42% to hold FFGCX, and it also has a 1% short-term trading fee for shares held less than 30 days. Both instruments' exposure to Monsanto has me somewhat concerned. As I explained last week in the article, Agribusiness Bulls Led to Slaughter, this agricultural titan has recently run into its fair share of hurdles, reporting poor earnings, reducing forecasts, and struggling with its RoundUp branch. This week, the company announced that it was lowering its full year guidance. Throughout 2010, the company's shares have taken a nosedive, dipping over 33%.
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