Jim Rogers Benchmarks Guide Commodity ETFs
February 5th at 8:06am by Tom Lydon
Investment guru and prominent commodities bull Jim Rogers has pointed to tight supply and central banks’ money-printing spree as reasons for taking on physical assets. With exchange traded funds, investors can play this commodities outlook.
Specifically, there are several exchange traded products based on indices designed by Rogers. He developed the commodity benchmarks to track expected global consumption based on his research and personal experiences traveling the world. He has penned several books, including Investment Biker: Around the World with Jim Rogers.
Rogers’ commodity indices are different from other benchmarks that weight by return or liquidity. His approach is to weight commodities based on consumption to provide diversification.
At the 2013 ETF Virtual Summit, Rogers pointed out that world governments have gotten to the habit of printing money to solve their economic problems. Moreover, Rogers believes that investors will find opportunities in natural resources as there are “supply problems in commodities going forward.”
“We will make money in commodities because of supply shortages … and governments will print money,” Rogers added. [Jim Rogers: Commodities ETFs to Benefit from Monetary Easing, Supply Issues]
Rogers designed several commodities indices, and investors can gain exposure to commodity movements through the exchange traded notes that are tied to the Rogers International Commodity Index (RICI).
For instance, the Royal Bank of Scotland launched a suite of exchange traded notes tied to Rogers indices last year. The ETNs try to capitalize on price differences between near-dated and future-dated commodity futures and mitigate the negative impact of rolling futures, compared to funds that just roll front month contracts, which could result in negative roll yields in a contangoed market. [Backwardation & Contango]
- RBS Rogers Enhanced Commodity Index ETN (NYSEArca: RGRC): RGRC tracks the RICI Enhanced Commodity Total Return Index, which includes 36 commodities in the futures market with varying maturities, along with interest earned on cash collateral. As of 12/31/12, top commodity holdings included crude oil 13.4%, Brent crude 10.3%, corn 6.8%, natural gas 6.6%, ROB gasoline 4.2%, aluminum 4.0%, copper 4.0%, heating oil 4.0%, gold 3.9% and sugar 3.1%.
- RBS Rogers Enhanced Agriculture ETN (NYSEArca: RGRA): RGRA follows the RICI Enhanced Agriculture Total Return Index, which holds 20 commodities in the agriculture futures market, plus interest on cash collateral. As of 12/31/12, top holdings include corn 18.2%, sugar 8.2%, soybeans 8.1%, wheat 7.8%, live cattle 6.9%, coffee 6.9%, cotton 5.9%, lean hogs 5.6%, Kansas City Wheat 5.3% and soybean oil 5.3%.
- RBS Rogers Enhanced Energy ETN (NYSEArca: RGRE): RGRE tries to reflect the performance of the RICI Enhanced Energy Total Return Index,which provides exposure to 6 commodities in the oil and gas commodity futures market. Commodity weightings include WTI crude 32.4%, Brent crude 24.9%, natural gas 15.9%, gasoline RBOB 10.0%, heating oil 9.6% and gas oil 7.3%.
- RBS Rogers Enhanced Precious Metals ETN (NYSEArca: RGRP): RGRP tracks the RICI Enhanced Pecious Metals Total Return Index, which provides exposure to 4 commodities in the precious metals futures market. Precious metals weightings include gold 50.4%, silver 23.4%, palladium 14.2% and platinum 12.1%.
- RBS Rogers Enhanced Industrial Metals ETN (NYSEArca: RGRI): RGRI tries to reflect the performance of the RICI Enhance Industrial Metals Total Return Index, which holds 6 commodities in the industrial metals futures market. Commodity weightings include aluminum 30.7%, copper 30.4%, zinc 15.6%, lead 11.9%, nickel 7.4% and tin 4.1%.
All RBS Rogers ETNs come with a 0.95% expense ratio. Additionally, the ETNs mature on Oct. 29, 2042.
On the other hand, ELEMENTS offers ETNs that track the RICI index, but they do not follow the “enhanced” methodology of investing in futures contracts with varying maturities. Instead, these ETNs are exposed to contracts that are rolls and purchases the front-month contract for each commodity every month.
- ELEMENTS RICI Total Return ETN (NYSEArca: RJI): Top holdings include crude oil 21.0%, Brent 14.0%, corn 4.8%, wheat 4.8%, cotton 4.2%, aluminum 40.%, copper 4.0%, soybeans 3.4%, gold 3.0% and natural gas 3.0%.
- ELEMENTS RICI Agriculture ETN (NYSEArca: RJA): Top holdings include corn 13.6%, wheat 13.6%, cotton 12.0%, soybeans 9.6%, coffee 5.7%, live cattle 5.7%, sugar 5.7%, soybean oil 5.7%, cocoa 2.9% and lean hogs 2.9%.
- ELEMENTS RICI Energy ETN (NYSEArca: RJN): Holdings include crude oil 47.7%, Brent 31.8%, natural gas 6.8%, RBOB gasoline 6.8%, heating oil 4.1% and gas oil 2.7%.
- ELEMENTS RICI Metals ETN (NYSEArca: RJZ): Holdings include aluminum 19.0%, copper 19.0%, gold 14.2%, lead 9.5%, silver 9.5%, zinc 9.5%, platinum 8.5%, nickel 4.7%, tin 4.7% and palladium 1.4%.
For more information on commodity funds, visit our commodity ETFs category.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.