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Commodity ETFs command mixed investor confidence, drab returns in 2018

Investor confidence in commodity-focused exchange-traded funds varied in 2018 even as overall performance was lackluster.

Gold equity ETFs, which invest directly in mining stocks, reversed a median net inflow of US$8.1 million in 2017 to an outflow of US$5.1 million in 2018. The eight ETFs included in the analysis saw mixed client flows but unanimous negative total returns in 2018, resulting in a median negative total return of 12.2% for the year, from a positive 9.8% yield in 2017.

Four gold equity ETFs saw net inflows in 2018, led by VanEck Vectors Gold Miners ETF that saw the largest net inflow for the year of US$3.62 billion and the largest AUM by year-end at US$10.39 billion. VanEck's smaller Junior Gold Miners ETF followed, albeit distantly, with a US$284.4 million net inflow for the year that took year-end AUM to US$4.21 billion.

Of the gold-equity ETFs that had outflows, iShares MSCI Global Gold Miners ETF took the lead after ceding US$126.7 million for the year to ultimately end the year with AUM at US$172.3 million. Sprott Junior Gold Miners ETF had the second-largest net outflow of US$75.0 million for the year that left AUM at US$41.3 million.

Negative one-year total returns were observed across the board, equivalent to 10.7% for VanEck Vectors Gold Miners, 10.2% for VanEck Junior Gold Miners and 14.8% for iShares MSCI Global Gold Miners. Sprott Junior Gold Miners had the largest negative total return for the year among all gold equity ETFs at 24.0%.

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Precious metals-focused ETFs saw a slowdown in net inflows year over year in 2018, with median net inflows at US$5.2 million, versus US$10.2 million in 2017. Net inflows and negative one-year total returns dominated for the year in review.

Despite bucking the bias for inflows with a net outflow of US$1.80 billion in 2018, SPDR Gold Trust, which follows the gold spot price and invests in physical gold, still managed to end the year with the largest AUM at US$32.38 billion. Its one-year total return was negative 2.8%, at par with the median for all commodity ETFs.

SPDR Gold Trust competitor iShares Gold Trust had the largest net inflow of US$1.60 billion in 2018, helping the ETF end the year with the second-largest AUM at US$11.52 billion.

Aberdeen Standard Physical Platinum Shares ETF, which ended the year with US$492.7 million in AUM, had the largest negative one-year total return of 15.7%. An exception to negative returns, ETFS Physical Palladium Shares yielded 21.4% in positive one-year total returns, despite logging an annual outflow of US$72.9 million for the year that left year-end AUM at US$186.5 million.