Roll Yield in 2025: The Hidden Driver Behind Futures Returns

Roll yield is the return generated (positive or negative) when an investor rolls a maturing futures contract into a new one. This process is fundamental for anyone investing in products that track commodities, volatility, or certain indices using futures contracts, since these contracts have expiration dates.

In simple terms, roll yield emerges because the price of a futures contract can differ from the spot price of the underlying asset, and from the price of the next contract in the futures curve. The direction and magnitude of the roll yield depend on the shape of this curve:

• Contango: When longer-dated futures are priced higher than near-term contracts. Rolling here typically produces a negative roll yield, eating into returns.

• Backwardation: When longer-dated futures are priced lower than near-term contracts. Rolling here generates a positive roll yield, boosting returns.

Why should Aussie investors care? Because in 2025, with local and global markets leaning more heavily on futures-based ETFs and managed funds, the cumulative impact of roll yield can be significant—sometimes the difference between profit and loss.

With the ASX seeing a surge in commodity ETFs and super funds diversifying via global futures, roll yield is more relevant than ever. Here’s how it’s playing out across common investment vehicles:

• Commodity ETFs: Products tracking oil, gold, or agricultural commodities often use rolling strategies. For example, if an oil ETF must sell expiring contracts and buy pricier new ones (contango), investors may see returns lag the spot price of oil, even if oil is up year-on-year.

• Superannuation Funds: Many ‘growth’ or ‘balanced’ super options now use futures to manage risk or gain exposure to overseas markets. Negative roll yield can subtly chip away at performance, a fact buried in many PDS documents.

• Active Traders: For self-directed investors trading S&P/ASX 200 futures or volatility products, understanding roll yield is crucial for accurate risk management and profit targeting.

In 2025, several Australian ETFs have updated their product disclosure statements to highlight roll yield risk, following ASIC’s 2024 push for greater transparency in managed investment products. The ASX also introduced new reporting guidelines requiring funds to disclose the estimated annual impact of roll yield in their quarterly updates.

Consider an Australian investor in a popular ASX-listed crude oil ETF. In 2024, as oil prices rebounded, spot oil rose 15%. Yet, the ETF only returned 7%. Why? The fund rolled expiring contracts in a steep contango market, repeatedly selling low and buying high. The cumulative negative roll yield accounted for the gap—a classic scenario that’s become increasingly common as global commodity markets remain volatile in 2025.

This year, several ETFs have responded by shifting to more sophisticated rolling strategies. Some now use ‘optimized roll’ algorithms, which attempt to choose contracts with the least negative (or most positive) roll yield. Others stagger their roll dates or diversify across contract months to mitigate the impact.

• Read the PDS: Check the product disclosure statement for explicit references to roll yield and rolling strategies.

  • Monitor Market Structure: Use ASX and CME market data to check whether the relevant futures curve is in contango or backwardation.

  • Compare Total Returns: Don’t just look at the headline movement of the underlying commodity or index—review ETF or fund performance versus the spot market.

  • Consider Alternatives: Some new Australian ETFs in 2025 are now offering physically-backed commodity exposure, reducing roll yield risk altogether.

Roll yield isn’t just a technical quirk—it’s a crucial driver of long-term returns in futures-based products. With the ASX, ASIC, and ETF providers putting more focus on transparency in 2025, Australian investors are better equipped than ever to understand and manage this hidden cost (or benefit). As futures-based products continue to grow in popularity, being roll yield-aware could be the edge that separates the savvy from the average.