Harnessing the Power of Exchange-Traded Products for Commodity Exposure

Exchange-traded products have proven to be an efficient and effective means for investors to gain access to asset classes such as commodities. After several years of a prolonged drawdown, commodities are beginning to regain favor with investors; however, excessive volatility and the historic propensity for large drawdowns remain an impediment for the asset class. Active managers have long successfully used time-tested principles, such as momentum, to successfully regulate exposure to commodities. In this article, the author puts forth a straightforward methodology using time-series momentum applied to commodity exchange-traded products to produce a dynamic portfolio that can provide exposure to the asset class while mitigating risk.