A Second Commodity ETF
Barclays Global Investors has finally launched a commodities exchange traded fund (ETF). This new offering began trading July 21, 2006 on the New York Stock Exchange under the symbol GSG. This ETF follows on the heels of Deutsche Bank's earlier-to-market commodities ETF, DBC and tracks the performance of a commodities index that features 24 individual commodities.
Jim Wiandt of Index Universe has identified a difference in the structure of this ETF worth noting: "Goldman Sachs is taking a somewhat unusual approach to tracking the commodities market. Rather than simply buying the futures contracts listed in its benchmark index and rolling them over each month, Goldman Sachs will buy CERFs -- long-term options traded on the CME with expirations dating out to five years -- that are linked to the performance of the index. This means less day-to-day management hassle (and expense) for Barclays."
Although GSG has to contend with not having been first to market, it does have in its favor the fact that the GSCI is a very well known index in the commodities space. Both funds will charge the same 75 basis point management fee, which in each case will be paid out of interest income earned by the fund.
That leaves the biggest difference between the two ETFs being in what they track. The DBC is a focused index of just six commodities, but offers a fairly balanced exposure to the commodities market. In contrast, the GSCI is more diversified with 24 commodities, but is heavily concentrated in the energy sector. I for one will be stick with Deutsche Bank's offering. It is more heavily weighted in energy than I'd like, but it at least has less in energy than GSG. One major item missing from DBC is copper which GSG does at least hold 4% of its assets in.