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ETF Specialist

Why Conventional Commodity Indexes Will Likely Disappoint

A look at the true drivers of commodity futures returns shows that popular indexes like the GSCI are lacking.

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Note: This article is part of Morningstar's December 2014 Guide to Better Investment Picking special report. An earlier version of this article appeared in February 2012.

I hate to pile on commodities funds, already beaten down by years of underperformance and outflows, but most are terribly flawed in both construction and premise. The static, long-only commodity futures indexes do not capture the biggest sources of profits that accrue to investors in commodity futures.

Samuel Lee does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.