Commodity Funds’ Outflows Obscure Potential

Commodity Funds’ Outflows Obscure Potential

Buying DBC and PDBC on price weakness appears to remain a good approach.

Reviewed by: Lisa Barr
Edited by: Ron Day

The commodities asset class dropped in the first quarter as the U.S. long bond rallied and the dollar jumped.  

But bull markets rarely move in straight lines, and an overall composite of 29 of the leading raw materials that trade on the U.S. and U.K. exchanges posted a 1.94% loss.  

The Invesco DB Commodity Index Tracking Fund (DBC), a highly liquid fund weighted to energy commodities, likewise dropped in the first quarter, underperforming the commodities composite.  

First-Quarter Commodity Losses  

The six sectors making up the commodities asset class posted the following first-quarter results: 

  • Soft commodities were the best-performing sector, with an 11.1% gain 
  • Animal proteins edged 0.6% higher. 
  • Base metals fell 2.9% 
  • Grains moved 4.1% lower  
  • Precious metals declined by 4.4% 
  • Energy commodities were the worst-performing sector, with a 12% loss 

Commodities posting double-digit percentage gains were: 

  • Gasoline crack spreads: +55% 
  • Frozen concentrated orange juice: +31% 
  • Cocoa: +13% 
  • World sugar: +11% 

The commodities posting double-digit percentage losses were: 

  • Natural gas: -50% 
  • Distillate crack spreads: -41% 
  • Rhodium: -41% 
  • Rotterdam coal: -26% 
  • LME nickel forwards: -21% 
  • Heating oil: -20% 
  • Palladium: -18% 
  • Lean hogs: -14% 
  • Soybean oil: -13%  
  • CBOT wheat: -13% 

In the first quarter, 15 of 40 commodities moved higher, while 25 declined.  

DBC: Weighted to Energy 

DBC’s concentration is in energy commodities. At $24.39 per share on April 14, DBC had $2.18 billion in assets under management. DBC trades an average of nearly 1.3 million shares daily and charges a 0.87% expense ratio.  





DBC lost 3.7% loss in the first quarter. While the ETF underperformed the composite of 29 of the leading commodities future and forward markets in the U.S. and U.K., it outperformed the energy sector, which was 12% lower in 1Q.  

The Difference Between DBC and PDBC 

DBC is a product that provides investors and traders with a K-1 tax statement used for business partnerships to report income, losses, capital gains and dividends to the Internal Revenue Service. With the K-1, a partner’s earnings can be taxed at an individual tax rate versus the corporate tax rate.  

The Invesco Optimum Yield Diversified Commodity Strategy No K-1 ETF (PDBC) offers similar exposure without a K-1 tax statement.  





At $14.61 per share on April 14, PDBC had over $5.6 billion in assets under management. PDBC trades an average of over 3.61 million shares daily and charges a 0.59% expense ratio. It fell 3.8% in the fourth quarter.  

Outflows in 1Q 

According to the Fund Flows tool, DBC and PDBC had outflows from the end of 2022 through March 31, 2023. 


DBC Outflows 1Q



The above chart shows $416.2 million flowed out of DBC in the first quarter. Meanwhile, $390.80 million flowed out of PDBC over the period.  

Higher for 2Q 

On April 14, DBC was at $24.39 per share, with PDBC at $14.61, both up 2.7% from the end of the first quarter. The increases resulted from OPEC+’s surprise April 2 production cut, which sent crude oil and oil product prices gapping higher. Crude oil rose to over $80 per barrel, putting upward pressure on DBC and PDBC.  

Rising energy prices are bullish for commodity-related ETFs with significant energy sector exposure.  

Factors Supporting Commodities and DBC 

The following factors support gains in DBC and PDBC at present: 

  • The trend in crude oil and oil products has turned higher as OPEC+ cut production, the peak driving season is on the horizon and China is emerging from COVID-19 lockdowns, increasing energy demand.  
  • Gold is over $2,000 per ounce. The precious metal is a barometer for other commodity prices.  
  • Nagging inflationary pressures weigh on fiat currency values as the economic condition erodes purchasing power and increases the cost of raw material production, putting upward pressure on prices.  
  • The commodity asset class entered a bull market phase from the early 2020 pandemic-inspired low. Bull markets rarely move in straight lines, and sell-ffs are common in volatile commodity markets. However, the trend remains higher, and the trend is always your best friend in markets across all asset classes.  

DBC and PDBC are highly liquid ETFs with lots of upside potential. Buying on price weakness has been the optimal approach since the early 2020 low, and I expect that trend to continue.  

Andrew Hecht is a Nevada-based writer and analyst covering stocks, bonds, foreign exchange, cryptocurrency and raw material markets. He has over four decades of experience in markets across all asset classes, concentrating on commodity markets. Hecht was a senior trader at Salomon Brothers in the 1980s and 1990s, running sales and trading businesses. In 2013, McGraw Hill published his book, “How to Make Money in Commodities."