Amid a brutal year in the commodities complex, some investors may be looking for some added assistance by way of active management when it comes to hard assets.
The iShares Commodities Select Strategy ETF (NasdaqGM: COMT), which the world’s largest ETF issuer launched today, brings the benefits of active to management to commodities investors in what is the first long-only ETF providing broad exposure to commodities in a ’40 Act regulated structure.
COMT holds a mixture of futures contracts and stocks with current holdings comprised of 21 futures contracts and 180 stocks from commodity producers, according to iShares data.
“COMT delivers direct access to commodity prices via futures contracts, including agriculture, livestock, energy, industrial metals, and precious metals. The fund manager uses a futures roll process designed to improve returns by minimizing the negative impacts of contango and seeks to benefit from the opposite of contango, known as ‘backwardation’,” according to a statement issued by iShares.
The new ETF could be an ideal play for investors looking to play a rebound in downtrodden energy equities and futures. The United States Oil Fund (NYSEArca: USO) has plunged 13% in the past month and hit a new 52-week earlier Thursday. With 54% of its weight allocated to energy futures and another 14% going to energy equities, COMT is more than adequately levered to a potential rebound in oil prices and equities. [Saudis Pressure Oil ETFs]
Agriculture equities and futures combine for another 15% of the new ETF’s weight. A combined 6% of COMT’s weight goes to precious metals producers and futures.
“COMT has a simplified tax treatment compared to most commodity funds. Most commodity funds are structured as publicly-traded partnerships, and have a pass-through taxation structure. This effectively shifts the income tax liability from the fund earning the income to the shareholders who hold the fund. Unlike such commodity funds, COMT will report taxable gains and distributions on a Form 1099, the standard tax reporting form for mutual funds and ETFs,” added iShares.
Active management offers advantages with commodities. For example, the actively managed First Trust Global Tactical Commodity Strategy Fund (NasdaqGM: FTGC), with which COMT will compete, is down just 2% this year compared to a 3.6% loss for the GreenHaven Continuous Commodity Index Fund (NYSEArca: GCC). [A Shining Star Among Commodities ETFs]
iShares, a unit of BlackRock (NYSE: BLK), the world’s largest asset manager, also introduced the iShares MSCI Emerging Markets Horizon ETF (NYSEArca: EMHZ) today. COMT charges 0.48% per year, a favorable fee relative to many actively managed ETFs.
ETF Trends editorial team contributed to this post.