The Dismal Performance of Commodity ETFs

By on November 24, 2010

Izabella Kaminska, writing for the Financial Times, reports on the issue of rollover and contango decay in commodity exchange traded products in her article, “Commodity ETFs: even worse than you thought.”

For example, looking at the following chart, readers can see a clear underperformance in the USO ETF versus a straight rolling WTI futures position here (i.e. a position that already accounts for contango roll losses):

Click on chart for larger image:

SMA Comment: The lesson from Kaminska’s analysis are that investors should stay away from commodity ETFs unless they hold them for very short periods.


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