Last year was a boon for energy-focused exchange traded funds (ETFs), attracting billions in investor dollars, despite “wildly uneven” returns. Some funds were up by double digits for the year, others down by as much.
The rapid growth and extreme popularity of energy-focused ETFs occurred even as some funds saw poor performance and others were being eyed by regulators and the Commodity Futures Trading Commission (CFTC). Brain Baskin for The Wall Street Journal reports that net cash flow into the funds totaled $30.1 billion in 2009, up from $13.4 billion in 2008, according to the NSX. Note that this is referring to long-only funds. [Commodity ETFs brace for regulations.]
ETF Daily News on iStock Analyst ponders which ETF is best: one that holds futures or one that holds equities? It’s largely a question of an investor’s conviction in the outlook for energy prices. ETFs that hold equities may not be as sensitive to day-to-day price movements, while futures ETFs can satisfy an appetite for risk and high reward potential.
Investors in gas and oil ETFs should note that the performance in either type of fund may not match changes in the spot prices for oil and gas over time because of price variations among different months’ futures contracts. The only way to capture those exact price changes is to buy and hold barrels, as U.S. Commodity Funds’ John Hyland puts it. Have you got the space for that? [How to play energy with ETFs.]