Invesco added to its $14.6 billion lineup of commodity futures ETFs on Wednesday with the launch of an agricultural commodity fund that does not require the issuance of any K-1 forms.
The Invesco Agriculture Commodity Strategy No K-1 ETF (PDBA) is technically actively managed but invests in the commodities included in the DBIQ Diversified Agriculture Index Excess Return.
PDBA comes with an expense ratio of 0.59% and lists on the Nasdaq stock exchange.
“Invesco Agriculture Commodity Strategy No K-1 ETF builds on our history of strategically launching new commodity ETFs that pioneer easy and cost-effective exposure to sectors, like agriculture, that may otherwise be difficult for investors to access,” said Anna Paglia, Invesco’s global head of ETFs and indexed strategies, of the fund.
Some commodity experts believe we may be in or are entering a commodity supercycle similar to the one experienced in the early 2000s, with the space expected to benefit from supply chain disruptions and rising inflation, among other contributing factors. Indeed, commodities in general have outperformed equity markets by significant margins lately.
As of yesterday, the broad Invesco DB Commodity Index Tracking Fund (DBC) was up 43.5% for the 12-month period, while the SPDR S&P 500 ETF Trust (SPY) was down 6.49%. Although the Invesco DB Agriculture Fund (DBA) was not up as dramatically as the broad commodity market—which was boosted by returns of nearly 80% on energy commodities—it still outperformed large cap equities by nearly 15 percentage points.
“Agriculture may be one of the most important sectors of the global economy. Recent geopolitical events, coupled with climate change and extreme weather, have created supply constraints and price volatility, directly impacting the global grains trade,” said Kathy Kriskey, product strategist, commodities and alternatives ETFs at Invesco.
PDBA’s associated index includes futures contracts on corn, soybeans, wheat, Kansas City wheat, sugar, cocoa, coffee, cotton, live cattle, feeder cattle and lean hogs. The fund invests primarily in futures contracts and other derivatives through a Cayman Islands subsidiary that is limited to 25% of the total portfolio, while holding high quality fixed income securities and cashlike investments as collateral in the rest of the portfolio, the prospectus says.
Invesco notes in a press release that PDBA’s active management mandate allows it to respond to developments regarding agricultural commodities and the yield curve in real time. With passively managed funds, the rules and periodic rebalancing of underlying indexes means that a manager tracking that index cannot make active decisions to mitigate losses or exploit advantages.
PDBA’s passively managed counterpart, DBA, currently weights soybeans at 14.27% of its portfolio, with corn and wheat at 13.69% and 12.92%, respectively.
Contact Heather Bell at [email protected]