We are not the only ones speaking a lot about commodities lately and it makes sense to revisit a relatively new diversified strategy to the space on the heels of some headlines regarding the closure of several commodity oriented hedge funds.
FTGC (First Trust Global Tactical Commodity Strategy Fund, Expense Ratio 0.95%) is not index based like many of its peers such as DBC, DJP, GSG, USCI, RJI, and GCC for example, but instead is an actively managed product, having debuted in October of 2013.
Since inception, the fund has grown to be the eighth largest fund in the broader “Commodity” ETP space in the U.S. listed market, and like two other strategies that we highlighted recently in USCI and GCC, has provided a cushion to the severe downside that many have experienced in 2014 broadly in commodity land.
FTGC is down approximately 6.7% year to date, roughly in-line with USCI and GCC for example, but notably has out-performed many of its larger peers in the space. According to fund literature, FTGC “unlike index-based commodities ETFs, the fund is actively managed and takes a risk-managed approach to commodities investing that aims to provide an improved risk/return relationship.”
It is additionally noted that the fund “selects 10 to 35 distinct commodities based upon liquidity as measured by open interest.
The list of commodities considered for inclusion can and will change over time.” The aforementioned point stands out as rather important to us, especially in times of great volatility and distress in many areas of the commodity markets, such as what we have recently pointed out in the realm of Precious Metals as well as Energy/Fuel commodities.
The fund methodology incorporates a monthly re-balance “to the optimal asset weighting given the desired risk range for the portfolio.” How are the portfolio managers of FTGC currently positioned in terms of their specific exposures to individual commodities, which have all basically been in motion on the aggregate lately?
The largest weights we see are in Silver (12.63%), New York Harbor ULSD (10.58%), Brent Crude Oil (9.36%), and Wheat (9.02%), with lesser positions in commodities like Coffee, WTI Crude Oil, Natural Gas, and
LME Nickel for example. Notably, Silver, the highest weighting, has rebounded from its recent lows (SLV has traded with a $14 handle twice in the month of November now including last Friday) on very heavy volume in the past several days.
First Trust Global Tactical Commodity Strategy Fund
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