ETF chart of the day: Cocoa

In the spirit of the Halloween holiday and especially for those chocolate lovers, we highlight the commodity Cocoa, which can be invested in via two little known ETPs.

NIB (iPath DJ-AIG Cocoa Total Return Sub-Index ETN, Expense Ratio 0.75%) is the larger of the two products, with $44.6 million in assets under management, averaging about 37,000 shares traded on a daily basis and the fund tracks futures prices in Cocoa.

The fund has been around since the middle of 2008. Several years later in 2011, iPath also launched CHOC (iPath Pure Beta Cocoa ETN, Expense Ratio 0.75%) to track Cocoa prices but the fund methodology is notably different than that of NIB. During the futures “roll” period, the index “may be comprised of two futures contracts” instead of just a single contract.

This is an important distinction as NIB utilizes only one futures contract in its methodology, and in commodities markets, this has been well documented that there can be potentially deleterious effects to portfolio returns due to issues of contango in the futures markets.

CHOC remains the smaller fund of the two, having only attracted $5 million in AUM which appears to be seed capital since inception.