Hard Asset ETFs You Might Not Know About

by: Tom Lydon

Commodity ETFs are gaining popularity. Many investors, however, might be interested in the number of hard asset ETFs available.

Hard-asset ETFs can be used to both diversify a portfolio as well as protection from both inflation and broader market turmoil, comments Don Dion for TheStreet.

Some hard asset ETFs don’t hold futures or physical commodities. Instead, these funds track indexes made up of the stock of commodity producers. Some broad equity-based, hard-asset ETFs include:

  • SPDR S&P Metals & Mining (NYSEArca: XME), currently up 66.8% year-to-date, includes U.S. metals and mining companies. The fund has an expense ratio of 0.35%.
  • Market Vectors RVE Hard Assets Prod ETF (NYSEArca: HAP), currently up 29.9% year-to-date, this fund seeks to reflect the Rogers-Van Eck Hard Assets Producers Index, which is often quoted as the definitive commodity equities benchmark. HAP also holds water and renewable energy components in its portfolio.

iPath offers both broad and specific exposure to hard assets with a line of exchange traded notes (ETNs) that track the futures contracts and Treasuries. Potential investors in these ETNs should be aware of regulatory actions that the CFTC may impose.

  • iPath DJ AIG Ind Metals TR Sub-Idx ETN (NYSEArca: JJM): up 45.6% year-to-date; includes a basket of commodities.
  • iPath DJ AIG Tin TR Sub-Idx ETN (NYSEArca: JJT): up 42.3% year-to-date
  • iPath DJ AIG Platinum TR Sub-Idx ETN (NYSEArca: PGM): up 32.5% year-to-date
  • iPath DJ AIG Lead TR Sub-Idx ETN (NYSEArca: LD): up 114.7% year-to-date
  • iPath DJ AIG Aluminum TR Sub-Idx ETN (NYSEArca: JJU): up 10.5% year-to-date

ETF Securities has successfully launched global physical-asset ETFs:

  • ETFS Silver Trust (NYSEArca: SIVR): up 9.8% in the last month
  • ETFS Gold Trust (NYSEArca: SGOL): down 1.3% in the last week

Larry Swedroe, principal and director at Research at BAM advisor Services and at Research for Buckingham Family of Financial Services, says that purchasing commodities is a way to protect against supply shocks and event risks that could negatively influence a portfolio of stocks and bonds, according to iStockAnalyst.

Swedroe also argues that position limits on commodity ETFs are “purely politically driven,” which could create conditions of more volatility. The ultimate outcome, he says, will result in the value of contracts being driven higher and people having to pay more for insurance.

Max Chen contributed to this article.