By Daniela Pylypczak
Tin has been an important part of history for thousands of years. The industrial metal was first combined with copper to produce bronze, one of the most popular metallic objects in antiquity. Thousands of years later, pure metallic tin was first produced and today it is used across a number of sectors. Nearly half of the tin produced is used in soldering, while the remainder is most popularly used in tinplates, chemicals, brass, and bronze. Production of the silvery white metal is dominated by Southeast Asia, China, and South America, although countries such as Russia and Australia also have large deposits.
With such an important presence in our economy, it is not surprising to see how tin has become one of the most popular commodities in the market. And thanks to its widespread industrial uses, investments in tin have surged over the years. Currently, tin futures contracts only trade on the London Metal Exchange. But through the rapid development of the exchange-traded product industry, investors now have a way to gain cheap and easy exposure to this industrial metal.
Under the Hood of JJT
The iPath Dow Jones-UBS Tin Total Return Sub-Index ETN (JJT) was introduced in mid-2008 and at the time, was the only fund to solely dedicate its assets to this commodity. Though it did not go on to become a major fund, it was able to gain a fair amount of traction among niche investors and cement its place into the financial universe. Compared to other single-commodity ETPs, JJT lies on the small side of the size scale with only $8 million in total assets [see also Doomsday Special: 7 Hard Asset Investments You Can Hold in Your Hand].
To achieve exposure to the industrial metal, JJT tracks an index that consists of only one futures contract on tin. Despite being a rather simple product, the fund has been able to deliver some of the most stellar returns in the past few years. But like many commodities, JJT has hit a rough patch recently as it struggles to post positive returns in volatile markets. Its trading volume remains at a relatively low 2,300 shares a day on average. Lastly, it is important to note that JJT is structured as an exchange-traded note, meaning investors will be exposed to the potential credit risk of the issuing institution.
Below are the quick stats (10/25/2012) to help investors get a better feel for this unique ETN:
- Issuer: Barclays iPath
- Expense Ratio: 0.75%
- Inception: 06/24/2008
- Total Assets: $8 M
- Average Daily Volume: 2,300
Who Should Use JJT
Just because this fund is publicly available to anyone with a trading account does not mean that it is intended for everyone. Instead, JJT will probably only be appropriate for niche investors who already have a firm understanding of the industrial metals world. Those who come in unprepared can get burned in a hurry. Like all commodity investments, tin is very trend-dependent, and will require investors to be up-to-date with the latest headlines about the industry [see also The Ten Commandments of Commodity Investing].
Since JJT is a futures-based product, investors will have to frequently monitor their positions, since these products are known to exhibit significant price movements in short periods of time. For those of you who meet the aforementioned requirements, JJT will be a great way to take advantage of the market, allowing you to play the commodity in a way that may be relatively expensive and difficult to implement on your own.
Disclosure: No positions at time of writing.