The most important exercise one can perform in this space in terms of due diligence is dissecting the underlying composition of each of these funds in terms of exposure, and aligning this information with internal market outlooks as well as preferences toward different commodity exposures in order to determine “best fit.” For example, DBC is unquestionably an “energy heavy” play, with more than 53% of the overall portfolio exposure being made up of Energy commodities (Brent Oil, Gasoline, WTI Crude, Heating Oil), and in the recent environment of tension in the Mideast, the fund has been the beneficiary of rising energy prices.
USCI and GCC on the other hand are on the opposite end of the spectrum as they offer broad exposure across a swath of commodities (including the likes of the aforementioned Energy products as well as Soybeans, Corn, Platinum, Tin, Natural Gas, Zinc, Lead, Lean Hogs, Cattle, Cotton, Sugar, and Gold to name a few) and attempt to “equally weight” the holdings over time with regular re-balances.
Thus, selecting the appropriate fit in this category depends much on one’s market views on the path of prices in the broad commodity markets as well as which segments may be the driver of such performance in the short and longer terms.
PowerShares DB Commodity
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