Despite a strong start to April, the U.S. markets closed out the month slightly in the red. This is because a big sell-off in momentum stocks such as biotechnology, social media and Internet as well as the ongoing turmoil in Russia-Ukraine weighed heavily on the broad equity markets.
However, commodities have performed exceptionally well on improving demand/supply dynamics and favorable global trends. In fact, most of the commodity ETFs/ETNs have emerged as strong winners in the month while majority of the equity funds lost double digits (read: Breakfast Turning Dearer: 3 ETFs to Pick).
iPath Dow Jones-UBS Nickel Subindex Total Return ((JJN - ETF report)) – Up 16.79%
This ETN was the star performer in April thanks to the Indonesian export ban and intensified geopolitical tensions in Russia, the world's second-largest nickel producer. More penalties on the country because of interventions in Ukraine could halt exports from the country’s largest mining company – Norilsk Nickel – which accounts for 17% of the global output, threatening the global supply of the metal.
The note tracks the Dow Jones-UBS Nickel Subindex Total Return, which provides returns through one futures contract on nickel. The product is unpopular and illiquid with AUM of just $9.4 million and average daily volume of under 6,000 shares. Expense ratio came in at 0.75% (read: Nickel ETFs Rally on Russian Concerns and Indonesia Ban).
iPath Dow Jones-UBS Coffee Subindex Total Return ETN ((JO - ETF report)) – Up 15.59%
Coffee prices have been flying higher this year on the Brazil drought concern, which is expected to result in production deficit for the 2014-2015 crop season. Though the prices showed some dips in March, it climbed again on hopes of further crop damages in Brazil. Investors should note that JO is also the top performing ETF of 2014, having returned nearly 87% so far.
This ETN follows the Dow Jones-UBS Coffee Subindex Total Return, which seeks to deliver returns through one futures contract on coffee. The product trades in solid volumes of around 259,000 shares on average daily basis, ensuring slightly extra cost in the form of relatively tight bid/ask spread beyond expense ratio of 0.75%. The note has attracted $113.8 million in assets so far this year.
iPath Dow Jones-UBS Natural Gas ETN ((GAZ - ETF report)) – Up 12.37%
Natural gas has been enjoying solid trading this year too with April being one of the best months for the commodity. This is primarily thanks to concerns about the producers’ ability to replenish the depleted stockpiles for the next winter as the coldest winter in decades sent heating demand soaring resulting in a lower level of inventory in 11 years (read: Is It Finally Time to Buy the Natural Gas Equity ETF?).
GAZ delivers returns through an unleveraged investment in the natural gas (currently the Henry Hub Natural Gas futures contract traded on the NYMEX) futures contract plus the rate of interest on specified T-Bills. The product follows the Dow Jones-UBS Natural Gas Total Return Sub-Index. The note has amassed $34.4 million in its asset base while trades in moderate volume of more than 121,000 shares per day. It charges 75 bps in fees per year from investors.
C-Tracks on Citi Volatility Index ETN ((CVOL - ETF report)) – Down 13.78%
April was the cruelest month for this volatility ETN, linked to the Citi Volatility Index Total Return. The note provides investors direct exposure to the implied volatility of large-cap U.S. stocks. The benchmark combines a daily rolling long exposure to the third and fourth month futures contracts on the VIX with short exposure to the S&P 500 Total Return Index.
Volatility products tend to outperform when markets are falling or fear levels over the future are high, but neither of this has happened lately. While stronger-than-expected earnings and some positive economic data fueled a rally in the stock market, interest rates hike woes and investors’ shift from high-flying to defensive stocks continued to keep the market returns at check (see: all Volatility ETFs here).
The product has amassed just $9.8 million in its asset base while charging 1.15% in annual fees from investors. It trades in a small volume of 43,000 shares per day, thereby increasing the total cost of the ETN.
Global X Social Media Index ETF ((SOCL - ETF report)) – Down 11.85%
This ETF has experienced a major weakness due to social media sell-off in U.S. and China. U.S. firms take more than half of the fund’s portfolio while Chinese firms account for 25.6% of total assets.
In particular, the selling pressure was heavy in some of the fund’s top holdings such as Facebook (FB), Tencet Holdings (TCEHY), LinkedIn (LNKD), Yelp (YELP), Zynga (ZNGA) and Twitter (TWTR). These stocks make up for a combined 48% of SOCL (read: Sell-Off in Social Media Stocks Puts SOCL ETF in Trouble).
The fund tracks the Solactive Social Media Index and holds 28 securities in its basket. It has managed $128.1 million in AUM and charges 65 bps in annual fees. Volume is good as it exchanges more than 234,000 shares a day.
Global X Uranium ETF ((URA - ETF report)) – Down 10.78%
Uranium is still bearing the brunt of the collapse of the uranium industry following the Fukushima disaster of March 2011. This ETF offers a pure play in uranium with more focus on uranium producers and less on nuclear energy producers. This is done by tracking the Solactive Global Uranium Index.
The fund has amassed $225.3 million in its asset base and trades in a good volume of 211,000 shares per day. Holding 24 securities in its basket, the product is heavily concentrated on its top 10 holdings. From a country look, American securities make up just 11.6% of the total assets, leaving the bulk to Canada (59%) and Australia (23.4%).
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