A Commodity CEF That Lags Its Sector

Includes: EWA, GCS, GLD, IXC, IYM
by: Roger Nusbaum

Roger Nusbaum submits: The Millionaire-Now blog (written by my brother) occasionally posts an all-CEF portfolio that he tweaks a little here and there.

One of the CEFs is new to me so I thought I would check it out. The fund in question is the DWS Global Commodity Fund (GCS). It is fairly new, it listed about two years ago. According to ETFconnect the fund will own stocks in commodity-related issuers.

To that objective the current top four are Exxon (NYSE:XOM) 7.2%, BHP Billiton (NYSE:BHP) 4.8%, Rio Tinto (RTP) 3.8% and the Gold ETF (NYSEARCA:GLD) 3.3%. The top four comprise 19.1% of the fund. This is all from ETFconnect so the fund could look different now.

The idea of the fund sounds like it is right up my alley -- it owns several of the themes I have been writing about for the last (almost) two years.

But something gets lost in the execution. The chart below compares GCS to iShares Australia (NYSEARCA:EWA), GLD, iShares Materials (NYSEARCA:IYM) and iShares Global Energy (NYSEARCA:IXC). I think the comparisons make sense and it lags them all, badly.

I do not know what the fund has owned in the past or the timing of any changes made within the fund.

GCS has traded at a persistent mid-teens discount to NAV so I don't think we can attribute the lag to the discount. If the discount were added back in it would move above IYM but that is it.

Long time readers will recall that I am not a fan of all-anything portfolios. Two years is enough track record to think that GCS is not the best way to capture energy/commodity/Australian exposure. I doubt this fund is even the third best way to invest in these parts of the market.

For disclosure; GLD, EWA and IXC are client or personal holdings.