ETF Securities' short commodities funds, like their leveraged funds, are defined in a way which obliges them to mechanically buy into strength and sell into weakness, eroding returns over time.

The short funds' objective is as follows:

"[the fund] is designed to change each day by minus one times (-1x) the daily percentage change in [the index] (before fees and adjustments). Therefore if [the index] falls (or rises) by 1% in one day, then [the fund] will rise (or fall) by 1%. In addition, an interest component is added each day to give a total return investment."

To achieve this, as with the leveraged funds, there will need to be a daily adjustment to the number of futures contracts held per unit of the fund. As the index falls, futures contracts will need to be sold, increasing the fund's short position, and as the index rises, futures contracts will need to be bought, reducing the fund's short position.

As a concrete example, if the index were to move from 10000 to 8000 (a change of -20%) on day 1 and move back from 8000 to 10000 (+25%) on day 2, the fund's objective would require the fund unit value to move from say 10000 to 12000 (+20%) on day 1, and then fall from 12000 to 9000 (-25%) on day 2. The index has no net change over the two days but the fund has lost 10%.

Presumably the short and leveraged funds have been defined around daily returns like this because if they used a longer period over which the fund returns should match the index, it would increase the risk of the fund falling to zero. The short funds fall to zero if there is a +100% move in the index during the return-matching period, which is unlikely to happen if the period is a single day, but which might well happen over a longer period. Likewise, the leveraged funds fall to zero if there is a -50% move in the index during the return-matching period, which again is unlikely to happen if the period is a single day, but which might well happen over a longer period.

Presumably the short and leveraged funds have been defined around daily returns like this because if they used a longer period over which the fund returns should match the index, it would increase the risk of the fund falling to zero.

...or even worse, the risk of the fund value turning negative, leaving the fund manager with a loss, because for whatever reason the loss on the futures position wipes out more than 100% of the collateral before the futures position can be closed out.