Commodity traders interested in gaining exposure to the lean hogs market can take a look at three ETNs: iPath Dow Jones-UBS Livestock Subindex Total Return ETN (NYSEArca: COW), UBS E-TRACS CMCI Livestock TR ETN (NYSEArca: UBC) and iPath Pure Beta Livestock ETN (NYSEArca: LSTK).
COW tracks the performance of the Dow Jones-UBS Livestock Subindex Total Return, which is comprised of futures contracts on livestock commodities, including 61.9% in live cattle and 38.2% in lean hogs. The ETN has a 0.75% expense ratio and is up 15.3% year-to-date. [Unheralded Commodities ETN is Mooooving Higher]
UBC follows the performance of the UBS Bloomberg CMCI Livestock TR Index, which includes about 58.3% live cattle and 41.7% lean hogs. The ETN has a 0.65% expense ratio and is up 12.4% year-to-date.
LSTK has a 39.6% exposure to lean hogs and 60.4% to live cattle. The note tracks the Barclays Commodity Index Livestock Pure Beta Total Return Index, which selects holdings based on a so-called Pure Beta Series 2 Methodology. The methodology tries to limit the effects of contango and backwardation in the futures market by holding futures contracts with varying maturities, instead of relying on front month contracts. The ETN has a 0.75% expense ratio and is up 5.1% year-to-date.
While limiting the effects of backwardation and contango helps mitigate volatility, the iPath Pure Beta Livestock ETN may not fully benefit from a backwardated market.
For more information on the agricultural commodities, visit our agriculture category.
Max Chen contributed to this article.