ETF Landscape: United Kingdom Industry Review - BlackRock ...

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ETF Landscape Year End 2010United Kingdom Industry Review from BlackRockFigure 31: Why include commodities in your portfolio? A long-only passive investment in commodities can provide investors with significant portfolio benefits. Counter cyclical with stocks and bonds.Strategic Diversification. Macro economic hedge against rising growth. Potential for high equity-like returns. Outlook for commodity investment returns can be both cyclically and secularly bullish.Tactical Severe capacity constraints due to lack of infrastructure investment. Significant benefits are expected to come from backwardation in the energy markets.Figure 32: Commodity index performance comparisonIndex # of commodities Weighting method Recomposition frequencyS&P GSCI 24 World production MonthlyRogers International Commodity Index 38 Discretion of committee AnnualThomson Reuters/Jefferies CRB Index 19 Equal weighted within broad sectors IrregularDow Jones UBS Commodity Index 19 Liquidity and production Annual% accumulated US$ total return500%500%450%450%400%400%350%350%300%300%250%250%200%200%150%150%100%100%50%50%0%0%-50%-50%Oct-98 Mar-00 Jul-01 Nov-02 Mar-04 Jul-05 Nov-06 Mar-08 Aug-09 Dec-10S&P GSCI TRThomson Reuters/Jefferies CRB Index TRRogers International Commodity Index TR DJ-UBS Commodity TRNote: Index returns are for illustrative purposes only and do not represent actual fund performance. Index performance returns do not reflect any management fees, transactioncosts or expenses. Indices are unmanaged and one cannot invest directly in an index. Past performance does not guarantee future results. Data as at year end 2010.Source: Global ETF Research and Implementation Strategy Team, BlackRock, Bloomberg.29 This document is not an offer to buy or sell any security or to participate in any trading strategy. Please refer to important information and qualifications at the end of this material.
ETF Landscape Year End 2010United Kingdom Industry Review from BlackRockFigure 33: Types of commodity exposureETFs providing exposure to ‘Commodities’ can be based on different types of underlying investments/vehicles which can lead to significantdifference in performance:Shares Price is based on the exchange traded share price of listed companies. e.g. gold miners, steel product producers, coal miners, companies engaged in agriculture/farming activities. Price is based on the traded price of the physical underlying commodity.Physical commodities The commodity is typically stored in a vault. e.g. gold, silver, platinum, palladium. Price is based on an index level which is derived from underlying futures contracts.Futures Typically used for exposures which cannot be physically stored or represent a basket of commodities. e.g. agriculture, energy, industrial metals, livestock.Source: Global ETF Research and Implementation Strategy Team, BlackRock.This document is not an offer to buy or sell any security or to participate in any trading strategy. Please refer to important information and qualifications at the end of this material. 30
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