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A Commodity ETF for Volatile Markets

NEW YORK ( TheStreet) -- Once considered a darling among investors, the commodities market has become noticeably volatile in recent weeks as looming macroeconomic headwinds have weighed heavily on investor confidence in the global growth picture.

Growth-correlated resources have not been the only commodities to take hits, however. On the contrary, even gold recently came under pressure. iShares Gold Trust (IAU) is off nearly 10% over the past month.

As resource prices continue to struggle to find stability, it will be tempting to make alterations with every fluctuation. Long-term investors, however, will need to exercise patience and flexibility in order to come out unscathed. For some, the time and effort needed to construct and maintain a strong portfolio may prove to be too daunting.

Luckily for those individuals who would prefer taking a hands-off approach to traversing the commodities realm at these questionable times, there are a handful of options at their disposal.

The WisdomTree Managed Futures Strategy Fund (WDTI) is designed to target a diversified basket of commodity and international currency futures using a pseudo-active, quantitative investment strategy. By opting to either go long or short any particular holding, the fund's managers can adjust its exposure to reflect any type of investing environment.

For example, as of Oct. 10, WDTI was flat energy; short grains, industrial metals, precious metals, and soft commodities futures; and long livestock contracts. On the currency front, the fund appears to be betting on the strength of the U.S. dollar; it is currently short the euro, Australian dollar, Swiss franc, Canadian dollar, and British pound. The Japanese dollar is the fund's only other long currency bet.

These holdings are not set in stone. Rather, according to the fund's prospectus, the individual sectors comprising WDTI's portfolio are rebalanced back to their base weights and reevaluated at the end of each month and year.

Throughout the past few months of volatile action, investors opting to use WDTI to manage their commodities exposure have benefited. Although the fund has dipped slightly more than 6% over the past three months, its downturn has been contained relative to passive, long-only commodity ETFs like the PowerShares DB Commodity Fund (DBC). It has seen inklings of a rebound in recent days, but DBC still has plenty of ground to cover to recover from the 10% decline it has witnessed over this period.
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DBC $14.58 0.00%
IAU $12.55 2.60%
WDTI $42.95 0.00%
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FB $118.00 1.10%


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