Morningstar Advisor - February/March 2013 - (Page 64)

Gray Matters A Route to Commodities that Bypasses the Futures Market By Elizabeth Collins Equities of producers offer the benefits of commodity investing while avoiding derivatives and futures curves. The love affair with commodities continues unabated. Whether they’re looking for diversification, an inflation hedge, or to speculate on rising prices, investors have plowed hundreds of billions of dollars into commodity-related offerings, including both mutual funds and exchange-traded funds (Exhibit 1). Investments in commodity mutual funds, for example, grew to more than $137.6 billion by the end of 2011 from $9.2 64 Morningstar Advisor February/March 2013 billion at the end of 2002. The growth story for commodity-tracking ETFs is even more impressive. Assets skyrocketed to $150.4 billion from $770 million over the same period. Suffice it to say that we’ve come a long way since legendary investor and commodity aficionado Jim Rogers lamented, “Commodities get no respect.” This statement would be far from the truth today. Ways to Invest in Commodities There are three avenues to gain exposure to commodities: 1. Physically Hold the Commodity Physically backed exposure offers perfect tracking (net a management fee) to the underlying commodity, because the investor owns the physical commodity. For most investors, however, this is really only practical

Table of Contents for the Digital Edition of Morningstar Advisor - February/March 2013

Morningstar Advisor - February/March 2013
Letter From the Editor
Social Media, the Old- Fashioned Way
Do You Use Active Strategies?
Youth Appeal
How to Buy the Unloved 2013
Morningstar Managers of the Year
Investments á la Carte
Investment Briefs
Approaches to Absolute-Return Investing
In Agriculture, It’s Good to Be Strong
Yes, There Are Good Active Funds
The Decoupling
Where It Could Pay to Be Active
The Active Fund That Defies Obsolescence
The Epitome of an Active Manager
Lines of Communication
The Existence of Market Timing ‘Intelligence’
A Route to Commodities that Bypasses the Futures Market
Best Positioned for Health-Care Reform
Diversified Stock Funds That Earn Their Stars
Our Favorite Mutual Funds
50 Most-Popular Equity ETFs
Undervalued Stocks With Wide Moats
A Twisted Debate

Morningstar Advisor - February/March 2013