Many Commodity ETFs and ETNs Down Over 26% in 2014
Global commodity prices were weak throughout 2014 due to weakness from oil and precious metals as well as a stronger US Dollar. Commodity prices fell by 12.0% in December alone, and were down 29.2% for the year. Several investment funds that track global commodities, both leveraged and unleveraged, actively trade in the US in the form of exchange traded funds (ETFs) and exchange traded notes (ETNs).
ETFs and ETNs are set up to track the daily performance of an underlying index or strategy, allowing investors to buy a single security instead of many individual securities. Leveraged ETFs and ETNs are set up to track the daily performance of an underlying index or strategy, usually by two or three times in the same (bull) direction or inverse (bear) direction, by purchasing or selling complex option and derivative contracts in addition to the underlying securities.
The following securities that track commodity indexes were down over 26% each in 2014:
|Ticker||Fund Name||2014 Performance|
|DYY||PowerShares DB Commodity Double Long ETN||-42.32%|
|GSP||iPath S&P GSCI Total Return ETN||-35.21%|
|GSC||GS Connect S&P GSCI Enhanced Commodity Total Return Strategy ETN||-35.01%|
|GSG||iShares S&P GSCI Commodity||-32.96%|
|UCD||ProShares Ultra Bloomberg Commodity||-32.78%|
|DBC||PowerShares DB Commodity Tracking||-28.10%|
|SBV||iPath Pure Beta S&P GSCI-Weighted ETN||-27.67%|
|CSCB||Credit Suisse Commodity ETN||-26.47%|
Leveraged funds are specifically structured for traders looking to time the market and realize short-term profits based on the underlying index making single-day moves. Leveraged funds are generally not suitable for long-term investors, as the investment will ultimately lose value or significantly underperform, over a longer term, compared to its stated objective. In fact, Direxion Funds, a leader in leveraged ETFs, puts this disclosure in bold print on its web-page for each of its leveraged funds: “The fund should not be expected to provide [the multiple] times the return of the benchmark’s cumulative return for greater than a day.” Therefore, these leveraged funds are highly unsuitable for long term investors.
If your financial advisor or stockbroker recommended that you invest in securities that track global commodities, you may have options to recover your investment loss. If your advisor failed to fully disclose the risks of investing in securities that track global commodities, then you may have a claim for misrepresentation. If your investment objective was to only invest in safe and stable investments, you may have a claim for unsuitability. If securities that track global commodities made up a large portion of your portfolio, then you may have a claim for over-concentration and lack of diversification. If your advisor purchased this fund without your knowledge, you may have a claim for unauthorized trading. If your advisor purchased this fund on margin, you may have a claim for excessive use of margin and negligence.
The attorneys at Carlson & Associates, P.A., located in Miami, Florida, represent investors who have lost money due to the improper conduct of financial advisors. If you would like to have a free consultation, we can be reached at (305) 372-9700 to discuss your options.