Which Nickel ETF Is Right For You? JJN vs. NINI

Although many associate this silvery-white metal with the U.S. coinage system, nickel is actually one of theoldest known metals with its uses tracing back more than 5,000 years. Today, the vast majority of the world’s supply of nickel comes from only two places: a mine in Ontario, Canada and another one in Siberia, Russia. Nickel is generally prized for its anti-corrosive properties, as well as for its ferromagnetic characteristics. In regards to the U.S. five cent piece, nickel only makes up for a quarter of the coin’s composition, but it is still one of the biggest uses of  the metal [for more nickel news and analysis subscribe to our free newsletter].

Because of its industrial uses and its ability to serve as a hedge against the U.S. dollar and inflationary pressures, investing in nickel has grown in popularity over the years. And thanks to the development of the exchange-traded fund industry, investors now have several ways to gain access to this popular industrial commodity. Below, we outline the two most popular nickel ETFs and which one will fit your investment objectives.

iPath Dow Jones UBS Nickel Subindex Total Return (NYSEARCA:JJN)

Quick Stats (10/4/2012)

Total Assets: $6.7 million
Average Daily Volume: 1,300
Expense Ratio: 0.75%
In Depth: JJN Analyst Report and ETFdb Realtime Rating

Barclays iPath’s JJN was the first ever nickel ETN to hit the markets. Since its debut in 2007, the fund has not been able to attract significant attention as a viabletrading and investing instrument. JJN tracks an index that consists of only one futures contract on lead, which is currently the Primary Nickel futures contract traded on the London Metal Exchange. Although the fund may be appealing because of its simplicity, JJN has only been able to accumulate $6.7 million in total assets.  Its ADV is also relatively low in comparison to other commodity ETPs: JJN trades only 1,300 a day on average. It is also important to note that JJN is structured as an exchange-traded note, meaning investors will be exposed to the potential credit risk of the issuing  institution [see also The Ten Commandments of Commodity Investing].

JJN is Right for You if: You are an investor seeking to speculate on nickel’s movements through the use of futures contracts.

iPath Pure Beta Nickel (NYSEARCA:NINI)

Quick Stats (10/4/2012)

Total Assets: $1.4 million
Average Daily Volume: 2,800
Expense Ratio: 0.75%
In Depth: NINI Analyst Report and ETFdb Realtime Rating

NINI is the only other exchange-traded product available on the market, offering investors exposure to lead prices through the futures market, but with a slight twist. Unlike JJN which rolls its holdings on a monthly basis, NINI does not roll exposure on a predetermined schedule; the roll timing is based on a proprietary “Pure Beta” methodology designed to reduce the impact of contango or backwardation on returns. This is perhaps the fund’s most alluring feature, considering how both of these futures trading nuances can make a devastating impact on bottom line returns. Despite its contango-fighting feature, the fund has not gained popularity over the years: it currently manages only $1.4 million in total assets and has a paltry ADV of just 2,800 shares.

NINI is Right for You if: You are an investor looking to achieve nickel futures exposure, but want a methodology that helps avoid the adverse affects of contango.

This article was originally written by Daniela Pylypczak, and posted on CommodityHQ.