NEW YORK ( TheStreet) -- Both ETF issuers and mutual fund companies are vying for investors in commodities. Investors looking for exposure to the broad commodities sector can now choose from active or passive management and futures or equities-based strategies. When comparing commodity ETFs and commodity mutual funds, the fundamental differences should certainly be considered. While ETFs trade throughout the trading day, mutual funds are generally priced just once. Passive ETF strategies are generally lower-priced than active mutual funds. While an active trader should use ETFs to easily trade in and out of the commodities sector during trading sessions, long-term investors may prefer the oversight provided by mutual fund managers.
Since all three funds are relatively new, it is difficult to compare performance. Year to date, HAP is up nearly 33%. For the three-month period ending November 12, HAP and FFGCX were up 10.5% and 11.1% respectively. All three funds have similar holdings and portfolio concentration, so the best bet here is to go with an HAP. The mutual fund selection, FFGCX, could prove to be more stable over time, but investors should stick to the cheaper ETF with a slightly longer track record for now.
Year to date, GSG has advanced 10.35% while RYMBX has risen just 4.80%. Rydex charges a 1.64% net expense ratio for RYMBX, while iShares sets GSG's net expense ratio at 0.75%. Between these two futures-based funds, the less-expensive GSG makes more sense in lean times. Since they both track the same index, and both face the same regulatory challenges, the accessibility of the ETF pays off for now. Another option worth considering is the massive $14.6 billion dollar PIMCO Commodity Real Return Strategy ( PCRAX) mutual fund. This fund also uses derivatives to track commodity prices, but collateralizes this exposure with bonds. This fixed income portion of the portfolio is heavy in TIPS, and has performed well in the stock-market bounce-back. Year to date, PCRAX is up more than 31%. The cost-effective structure of ETFs has helped to make these products affordable competitors in the commodity space. Active investors who need to trade in and out of the sector should consider using liquid ETFs to gain exposure. Sometimes, however, an active manager and strong firm can bring value to a fund. In the case of PCRAX, PIMCO's renowned team of fixed-income experts have helped the fund to outperform. -- Written by Don Dion in Williamstown, Mass.