Tracy continues, "The fund's portfolio is relatively concentrated and only contains about 25 names. And at roughly 45% of assets, the biggest portfolio concentration is in the steel sector, which continues to enjoy a tremendous rally amid unprecedented global demand from China and other emerging markets.

"The fund has outperformed 80% of its rivals in the natural resources category this year. There have been several factors behind the run-up in many portfolio holdings, including industry consolidation.

"The falling dollar has also played a role. Copper and many other commodities are denominated in U.S. dollars, so a weaker dollar makes them more attractive to foreign investors -- further pushing up their prices.

"Nevertheless, while day-to-day returns are likely to be volatile given the cyclical nature of many commodity prices (as well as the fund's narrow focus), we think long-term shareholders will ultimately be rewarded for their patience.

"After all, to a certain extent this fund is a play on the continued economic expansion that is taking place throughout the world's emerging markets. Construction requires large amounts of steel, copper, and other basic building materials, and there is a finite supply of these resources to go around.

"Still, given the risks, the fund is best left to aggressive investors and even then in limited doses. That being said, we do think investing in hard assets can be an integral component of a well-rounded portfolio. In our view, XME is an ideal way to gain exposure to this sector."