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ETF Research & Insights

Broad Commodity Exposure At a Hefty Price

If it's exposure to a broad basket of commodities that you're after, there are cheaper offerings than this ETF

Holly Cook 30 November, 2011 | 3:39PM

Morningstar analyst Lee Davidson has launched a Morningstar ETF Research report on RBS Market Access Rogers International Commodity Index ETF, which offers broad commodity exposure by tracking the Rogers International Commodity Index (RICI) covering 38 commodities in the energy, agriculture, and metals subsectors.

Davidson writes that, historically, commodities have been sought out by investors to increase their risk-adjusted returns given their low to negative correlation with equities and fixed income securities. In recent years, however, investors have seen trailing three-year correlations for broad-basket commodity indices and equities go from near 0% in 2005 to upwards of 75% in 2011, as measured against the STOXX Europe 600 and the MSCI World indices.

"Despite this rise in correlation, commodities have not lost all of their investment appeal," says Davidson in the report. "An exchange-traded product tracking a broad basket of commodity futures can still be utilised as a role player in a well diversified portfolio to hedge against unexpected inflation." He also notes, however, that investors have an abundance of choices when it comes to broad-basket commodity ETPs, and this particular offering comes with one of the highest fees currently levied for ETPs of this type.

Read the full report here. To search the full list of ETFs under Morningstar's research coverage, please click here. You may also want to read an explanation of Morningstar's Star Rating for ETFs or download our qualitative ETF research methodology.

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About Author Holly Cook

Holly Cook  is Managing Editor of Morningstar.co.uk

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