Analyse: Lyxor ETF Commodities CRB Non-Energy TR

Vor allem Agrar-Rohstoffe sind in diesem synthetisch replizierenden ETF hoch gewichtet/Roll-Problematik muss beachtet werden.

Lee Davidson 31.08.2012

Rolle im Portfolio

The Lyxor ETF Commodities CRB Non-Energy TR offers broad commodity exposure excluding the energy sector by tracking a benchmark covering 15 commodity futures in the agriculture, industrial metals, and precious metals subsectors. 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, investors have seen five-year correlations for broad-basket commodity indices (DJ UBS Commodity and Thomson/Jefferies CRB) go from near 10% in 2007 to upwards of 66%, in 2012 (measured against the STOXX Europe 600 and the MSCI World indices). However, this ETF has realised less of an increase in correlation to these same equity benchmarks (~30%) due to the absence of exposure to the energy sector. Despite this rise in correlation, 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 inflation.

Fundamentale Analyse

Lyxor ETF Commodities CRB Non-Energy, as the name implies, does not offer exposure to the energy sector but rather to the agriculture, industrial metals, and precious metals sectors. In recent years, agricultural commodities have seen increased investor interest due to escalating demand and diminishing supply as populations continue to grow and arable land grows scarcer. While the rate of population growth is expected to decline over the next few decades, population growth is still expected to be positive. In fact, the World Bank predicts that within the next 35 years roughly 2.1 billion people will be added to the current population of some 7 billion. The absolute increase in population levels implies a greater need for food. According to the Food and Agriculture Organization of the United Nations, food production must increase by 70%, with a confidence band of 60%-100%, by 2050 simply to keep up with the expected population growth. Meanwhile, most evidence seems to indicate that this target will be tough to meet. The growth in global grain yields has fallen off from a 3.5% pace in 1970 to 1.5% today with some rich-world producers failing to increase yields for wheat and rice over the past 10 years.

Industrial metals have historically been consumed by developed nations who have put them to use building infrastructure and improving industrial machinery and transportation networks. However, in the past half decade, demand from China and other emerging markets has been the single most significant driver for all four of the metals represented in this index, especially copper. Currently, Chinese copper consumption accounts for roughly 40% of global copper demand. As it stands now, China's slowing economic growth has resulted in declining copper imports since the start of 2012 with expectations for further in the second quarter.

Going forward, even with expectations for tapering Chinese growth, many industry experts still predict that global demand for industrial metals will ultimately exceed current supplies and even outstrip expected future production levels. With that said, industrial metal production does face some significant constraints including but not limited to: falling ore grades for copper in US and Chile, limited water supplies in dry mine regions, widespread strikes, energy constraints (most mines are coal-fueled), climate change, and weather disruptions.

The precious metals component of the Reuters/Jefferies CRB Non-Energy index is comprised of gold (9.8%) and silver (1.6%). Gold is a scarce commodity that has historically retained much of its purchasing power under strong inflationary pressures. Unlike paper currencies, gold is not heavily influenced government policies primarily because it cannot be created out of thin air. Gold's demand drivers are jewelry consumption, investment, and industrial uses, which account for 47%, 36%, and 10% of total demand respectively according to the World Gold Council's fourth first quarter 2012 report. Recently, the world’s central banks have been playing an increasingly important and active role in the gold market accounting for the remainder of gold demand (7%). Indeed, official sector gold purchases increased nearly six fold in 2011 versus 2010, according to the World Gold Council.


Lyxor ETF Commodities CRB Non-Energy tracks the Thomson Reuters/Jefferies CRB Ex-Energy index, which offers broad commodity futures exposure to the agriculture, industrial, and precious metals sectors. Since this index only rolls into the front-month contract, it is extremely susceptible to changes in the slope of its component commodities’ futures curves. Depending on the slope of the futures curve, the return of futures investment will be impacted by the roll yield generated when contracts are sold and repurchased. Historically, when contango is present, many commodity indices with front-month strategies have suffered significant losses when compared to the underlying spot price movements. Conversely, when backwardation is present, long commodities futures investments using front-month contracts have benefited from positive implied roll yield. The index weights the commodities by their perceived economic significance, trading frequency, and historical return contribution to the commodities space. Using these factors, it places a 34.5% weighting in the softs sector, 21.3% in grains, 21.3% in industrial metals, 11.5% in livestock, and 11.4% in precious metals. Individual commodities are weighted based on the same factors of economic significance and trading frequency. The index is rebalanced on a monthly basis.


To deliver the index return to investors, the Lyxor ETF Commodities CRB Non-Energy employs synthetic replication using an unfunded swap structure with parent company, Societe Generale (Aa2, A+, A+). In this structure, Lyxor buys a basket of securities from SocGen and enters into an arrangement in which the bank pays the index performance (net of fees) in exchange for the performance of the fund’s holdings. While Lyxor is a wholly owned subsidiary of SocGen, it does follow the best execution principle laid out by the European Markets in Financial Instruments Directive. In doing so, Lyxor challenges SocGen’s swap prices by putting the bank in competition with other external swap providers. If an external provider offers a better price, SocGen will match that swap price. Lyxor commodity ETFs currently hold liquid stocks from OECD countries, which comprise a minimum of 75% of the fund’s asset basket. Since the majority of the basket’s assets reside in the same or similar time zones as the ETF, overlapping trading hours will reduce liquidity risk if a liquidation of the basket is necessary. Lyxor will reset swaps whenever counterparty exposure approaches 10% of the fund’s NAV, in accordance with UCITS regulations. Additionally, swaps will be reset any time that there is a creation/redemption in the fund. The swaps are typically not reset to zero and therefore the fund tends to retain some degree of counterparty exposure at all times. Lyxor has begun to reduce its fund’s exposure to SocGen by holding a fund that invests in a repo fully collateralised with UK equities. Currently, this UK equity basket amounts to 7% of the fund’s NAV, but this can potentially be increased to 10%. Lyxor does not engage in securities lending at the fund level. This ETF is available in multiple currency denominations–USD and GBP–for those wishing to assume or eliminate currency risk from their investment.


Lyxor charges a total expense ratio (TER) of 0.35% for this ETF, which is lower than its broad commodity, non-energy peers.


Investors have an abundance of choices when it comes to ETPs tracking broad-basket commodity futures, but have only a few choices for broad commodity, non-energy ETPs. The key differentiating factor amongst them will be index construction. Due to differences in index construction, the variety of broad-basket ETPs will not necessarily perform similarly. In considering differences of index construction, an investor will want to focus on these indices sector exposure and rolling methodology. Historically, more evenly weighted (as measured by sector concentration) indices and those utilising “intelligent” rolling practices have generated superior performance and lower volatility relative to more concentrated indices that use more standard rolling practices.

Lyxor is the clear-cut market leader in the non-energy commodity ETF market with EUR 195 million in assets under management (AUM). Based on our research, the closest alternative in terms of AUM is the Amundi ETF Commodities S&P GSCI Non-Energy ETF with EUR 7 mil in assets. Amundi charges a 0.30% TER for this product.

For those wishing to include the energy sector in their commodity allocations, db X-trackers DBLCI OY Balanced is promising choice. It has addressed the dynamic nature of the commodity futures curves by employing an optimum yield methodology, which seeks to generate maximum implied roll yield. The db X-trackers ETF also uses synthetic replication and charges a TER of 0.55%.


Über den Autor

Lee Davidson  is an ETF analyst with Morningstar Europe.