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In January we illustrated that, contrary to popular belief, Gold has not been an effective inflation hedge (see Auspice Jan 2025 Blog for more). This month we expand on that analysis and also consider more diversified broad commodity solutions. Indeed, we strongly believe a diversified basket of commodities is the best approach alongside disciplined risk management (see Volatility and Max Drawdown, Figure 1).
Consider the topical, transient, and often volatile commodity themes experienced this decade, as detailed initially in the Auspice July 2024 Blog:
2020, Gold – During the outbreak of COVID, Gold initially was one of few commodity markets to do well and investors rushed to buy gold ETFs and gold mining stocks. Gold then traded sideways for over two years as most other commodities rallied. Gold’s recent performance has come during the period of disinflation, not inflation.
2021, ESG – As the world rebounded and united around “building back better”, anything broadly within a ESG theme did well. In commodities, Lithium, Copper, and related stocks were investor darlings. Copper has traded sideways since. Lithium has traded down below $10 from over $80 (perhaps a great upcoming trade on the long side once the trend reverses!).
2022, Petroleum Energy – Not long after the world shunned petroleum energies, a war, alongside notable strong performance in energy led to a complete reversal in investor preferences. Investors abandoned underperforming Solar and EV ETFs in lieu of petroleum. The once popular “TAN” solar ETF, and newer “KARS” electric vehicles ETF remain down approximately 60% from highs.
2023-2024, Uranium – Having traded sideways for years, Uranium and related stocks finally delivered performance, capturing investor sentiment and flows. In 2025 they have corrected.
2024, Precious Metals – Following three years of consolidation, Gold and Silver finally recaptured headlines and investor sentiment. Gold has made all-time highs while silver too has been strong, albeit related mining stocks - with hedging, financial engineering, and company risk - have failed to keep up. The popular GDX ETF is down 40% from 2011 highs, and the GDXJ junior mining ETF down over 70% since 2011.
This month’s blog highlights popular commodity index options and their respective tracking ETFs.
Given Gold’s recent (and arguably overdue) performance, here are a few considerations we think are important:
Gold has trailed the Auspice Broad Commodity Index for almost the entirety of the period commencing 2000, despite having almost double the volatility.
Gold has recently been on a strong run whereas Auspice Broad Commodity has consolidated. As suggested earlier, performance chasing historically has not been prudent.
If unsure as to what’s most accretive, it may be helpful to note that alongside almost double the risk adjusted returns, Auspice Broad Commodity has just a 0.42 correlation to gold. For the reluctant gold bugs, perhaps consider adding some more broad commodity diversification to enhance your gold position.
Figure 1 – Commodity Performance January 1st, 2000, through February 26th, 2025.
Source: Bloomberg and Auspice, as at February 28th 2025. You cannot invest directly in an index. The performance of Auspice Broad Commodity Index prior to 9/30/2010 represents index data simulated prior to third party publishing as calculated by the NYSE.
We can also look at performance in the recent inflationary regime that commenced in 2020. Most of the tracking ETFs have been live throughout this period, if not longer. A couple have briefly surpassed the COM ETF in returns, otherwise the COM ETF remains the top performer:
COM leads in risk adjusted returns, both Sharpe and Sortino.
COM has the lowest volatility and peak to trough drawdown, a fraction of the others.
COM has the lowest S&P500 monthly correlation, just 0.23.
Figure 2 – Commodity ETF Performance, January 1st, 2020, through January 31st, 2025
Source: Bloomberg and Auspice, as at February 28th 2025.
While not having performance prior to 2020, there are also two options for investors in Canada:
The TSX listed CCOM ETF is the equivalent to the NYSE listed COM ETF (both track the Auspice Broad Commodity Index).
The TD Commodities Pool has a 0.99 monthly correlation to the Bloomberg Commodity Index Total Return (BCOM TR) and 0.99 monthly correlation to the DJP and BCI ETFs (both track the BCOM TR index).
With some expecting an increase in inflation and volatility, we revert to the title of this blog, “Offense sells tickets, but defense wins championships”. Rather than chasing performance – chase good strategy and disciplined risk management. Particularly with recent equity strength, you might be underweight in your commodities and diversifying strategies portfolios. Now may be an opportune buying opportunity, with some proven managers effectively “on sale” (see more here).
In most asset classes such as equities, beta often outperforms and may be a good choice. In commodities, risk management is paramount for long term success in our opinion. Choose your exposure wisely.
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For further information, or to contact the team at Auspice, email info@auspicecapital.com.
The word, Auspice, is the root of auspicious, which means:
a sign of good things to come; protection or support.
The Auspice logo is an endless knot which symbolizes the union of wisdom and method. This captures the essence of our philosophy of applying a rules-based, disciplined approach to identify and capture market inefficiencies.
Our name and our logo reflect the positive impact that we aim to bring to our clients' investment portfolios while preserving capital and managing risk.
DEFINITIONS
Indexes
· Auspice Broad Commodity is a tactical long strategy that focuses on Momentum and Term Structure to track either long or flat positions in a diversified portfolio of commodity futures which cover the energy, metal, and agricultural sectors. The index incorporates dynamic risk management and contract rolling methods. The index is available in total return (collateralized) and excess return (non-collateralized) versions. Both the NYSE listed COM ETF and the TSX listed CCOM ETFs track the Auspice Broad Commodity Index.
· The Bloomberg Commodity Index Total Return (BCOM TR) Index is a broadly diversified commodity price index that tracks prices of futures contracts on physical commodities on the commodity markets. No one commodity can compose more than 15% of the BCOM ER index, no one commodity and its derived commodities can compose more than 25% of the index, and no sector can represent more than 33% of the index.
· The Standard and Poor's 500, or simply the S&P 500, is a stock market index tracking the stock performance of 500 of the largest companies listed on stock exchanges in the United States.
· S&P GSCI Total Return Index – A production-weighted commodity index covering a broad range of raw materials, including energy (crude oil, natural gas, gasoline, heating oil), metals (gold, silver, aluminum, copper, lead, nickel, zinc), agriculture (wheat, corn, soybeans, cotton, coffee, sugar, cocoa), and livestock (live cattle, feeder cattle, lean hogs). Its weighting heavily favors energy, making it sensitive to crude oil price movements.
· S&P GSCI Enhanced Commodity Total Return Index – A variation of the S&P GSCI that optimizes contract selection to reduce the impact of negative roll yields, particularly in contango markets. It follows the same broad commodity composition but selects futures contracts with more favorable roll characteristics
· Bloomberg Roll Select Commodity TR Index – A variation of the Bloomberg Commodity Index that seeks to minimize roll yield losses by selecting futures contracts with the best roll characteristics. It uses the same 23-commodity composition but optimizes futures contract selection to avoid adverse market structures like contango.
· Lyxor Commodities Refinitiv CoreCommodity CRB – A widely recognized commodity index consisting of 19 commodity futures, divided into energy (crude oil, heating oil, natural gas, unleaded gasoline), metals (gold, silver, aluminum, copper), agriculture (soybeans, corn, wheat, cocoa, coffee, sugar, cotton, orange juice), and livestock (live cattle, lean hogs). It provides balanced exposure and is often used as a broad commodity market benchmark.
· Credit Suisse Commodity Benchmark TR Index – A diversified commodity index that provides exposure across energy, metals, and agriculture with a focus on liquidity and economic significance. The index includes both front-month and deferred futures contracts to reduce volatility and improve performance.
· DBIQ Opt. Yield Diversified Commodity Index TR – A Deutsche Bank index that holds 14 major commodities across energy (crude oil, natural gas, heating oil, gasoline), metals (gold, silver, aluminum, copper, zinc, lead, nickel), and agriculture (corn, wheat, soybeans, coffee, sugar, cocoa). It employs an optimized contract roll strategy to minimize negative roll yield in contango markets.
· DBIQ Diversified Agriculture Index Total Return – A sub-index of the DBIQ series that exclusively tracks agricultural commodities, including corn, wheat, soybeans, coffee, sugar, cotton, cocoa, and livestock (live cattle, lean hogs). It is designed for investors seeking pure exposure to soft commodities and grains.
· S&P Gold TR Index (SPGSGCTR) – A total return index that tracks gold futures, primarily based on COMEX gold contracts. It reflects the price movement of gold along with the returns from rolling futures contracts and the interest earned on collateral.
· S&P 500 Total Return Index (SPXTR) – The total return version of the S&P 500, which tracks the 500 largest U.S. publicly traded companies across sectors such as technology, healthcare, financials, consumer discretionary, industrials, and energy. Unlike the standard price index (SPX), it includes reinvested dividends, providing a more comprehensive measure of long-term equity performance.
ETFs, UCITS, & Mutual Funds
· GSG ETF (iShares S&P GSCI Commodity-Indexed Trust) – GSG seeks to track the performance of the S&P GSCI Total Return Index, offering exposure to a broad range of commodities, with a heavy weighting toward energy. It primarily invests in commodity futures contracts rather than physical commodities.
· BCI ETF (abrdn Bloomberg All Commodity Strategy K-1 Free ETF) – BCI aims to provide exposure to a diversified basket of commodities by tracking the Bloomberg Commodity Index. It avoids K-1 tax reporting by using a 1099 structure, making it a tax-efficient option for commodity investors.
· CMDY ETF (iShares Bloomberg Commodity Balanced Trust) – CMDY is designed to track the Bloomberg Commodity Balanced Total Return Index, providing balanced exposure across agriculture, energy, and metals commodities. It uses a futures-based approach to gain commodity exposure.
· PDBC ETF (Invesco Optimum Yield Diversified Commodity Strategy No K-1 ETF) – PDBC actively invests in a diversified basket of commodity futures contracts with an "optimum yield" strategy, seeking to maximize roll returns while avoiding K-1 tax reporting. It provides broad exposure to the commodity market while aiming to reduce the negative impact of contango.
· DBC ETF (Invesco DB Commodity Index Tracking Fund) – DBC tracks the DBIQ Optimum Yield Diversified Commodity Index, offering exposure to a selection of the most liquid commodities, including energy, metals, and agriculture. It uses futures contracts to gain commodity exposure and employs an optimized roll strategy to enhance returns.
· GLD ETF (SPDR Gold Shares) – GLD is one of the largest and most popular gold-backed ETFs, designed to track the price of gold by holding physical gold bullion in secure vaults. It provides investors with direct exposure to gold price movements without the need for physical ownership.
· SPY ETF (SPDR S&P 500 ETF Trust) – SPY is the oldest and one of the most liquid ETFs, designed to track the performance of the S&P 500 Index. It offers broad exposure to the U.S. stock market, making it a popular choice for investors seeking diversification in large-cap equities.
· DJP ETF (iPath Bloomberg Commodity Index Total Return ETN) – DJP is an exchange-traded note (ETN) that seeks to track the Bloomberg Commodity Index Total Return, offering exposure to a broad basket of commodities. As an ETN, it does not hold physical commodities or futures but is instead a debt instrument issued by Barclays.
· CMDY ETF (iShares Bloomberg Commodity Balanced Trust) – CMDY tracks the Bloomberg Commodity Balanced Total Return Index, providing diversified exposure to commodities across energy, metals, and agriculture. It is structured as a commodity trust and invests in commodity futures contracts.
· CRBL UCITS (WisdomTree Broad Commodities UCITS ETF) – CRBL provides exposure to a broad range of commodities, tracking the Bloomberg Commodity Index while offering a European UCITS-compliant structure. It seeks to deliver a well-diversified commodity investment option for investors in international markets.
· The Credit Suisse Commodity Return Strategy Fund I (CRSOX) is a mutual fund that seeks to provide broad exposure to commodity markets by investing in commodity-linked derivative instruments, primarily commodity futures, while holding a collateral portfolio of fixed-income securities. The fund aims to track the returns of the Bloomberg Commodity Index while optimizing roll yields and mitigating the impact of contango. It is often used as a diversified hedge against inflation and market volatility.
· TD Alternative Commodities Pool – This is a Canadian alternative investment fund that provides exposure to a diversified basket of commodities, typically using futures and derivatives strategies. It is managed by TD Asset Management and benchmarked against Bloomberg Commodity Index. It does not explicitly track the BCOM TR however has a 0.993 monthly correlation since 9/23/2023 inception through 02/28/2025.
Publication Date: March 3rd 2025
IMPORTANT DISCLAIMERS AND NOTES
There is a substantial risk of loss in trading futures and options. Past performance is not necessarily indicative of future results.
The returns for Auspice Diversified Trust ("ADT") are “net” (including management and performance fees, interest and expenses). Returns represent the performance for Auspice Managed Futures LP Series 1 (2% mgmt, 20% performance) including and ending November 2019. From this point, returns represent the performance for Auspice Diversified Trust Series X (1% mgmt, 15% performance) which started in July 2014.
The indicated rates of return are the historical annual compounded total returns including changes in share and/or unit value and reinvestment of all dividends and/or distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any securityholder that would have reduced returns.
Some of the assumptions and opinions contained herein are the view or opinion of the firm and are based on management's analysis of the portfolio performance.
Prior to February 28, 2023, Auspice Diversified Trust was offered via offering memorandum only and this Fund was not a reporting issuer during such prior period. The expenses of the Fund would have been higher during such prior period had the Fund been subject to the additional regulatory requirements applicable to a reporting issuer. Auspice obtained exemptive relief on behalf of the Fund to permit the disclosure of the prior performance data for the Fund for the time period prior to it becoming a reporting issuer.
Commissions, trailing commissions, management fees and expenses may all be associated with investment funds. Please read the prospectus before investing. Investment funds are not guaranteed, their values change frequently and past performance may not be repeated.
The contents on this website are provided for informational and educational purposes and are not intended to provide specific individual advice including, without limitation, investment, financial, legal, accounting and tax. Please consult with your own professional advisor on your particular circumstances.
Futures trading is speculative and is not suitable for all customers. Past results are not necessarily indicative of future results. This document is for information purposes only and should not be construed as an offer, recommendation or solicitation to conclude a transaction and should not be treated as giving investment advice. Auspice Capital Advisors Ltd. makes no representation or warranty relating to any information herein, which is derived from independent sources. No securities regulatory authority has expressed an opinion about the securities offered herein and it is an offence to claim otherwise. Please read the offering documents before investing.
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The forward-looking statements contained herein were prepared for the purpose of providing prospective investors with general educational background information about the Funds and may not be appropriate for other purposes. Neither the Fund or the Manager assumes any obligation to update or revise them to reflect new events or circumstances, except as required by law.
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