While many seek ways to enhance and diversify their investment portfolios in a prolonged bull market, investors should consider commodities exchange traded funds as a key alternative investment to provide uncorrelated returns to traditional asset classes.
On the upcoming webcast, What’s Next for Broad Commodities? Key Themes and Portfolio Solutions, Eric Balchunas, ETF Analyst with Bloomberg Intelligence, Maxwell Gold, Director of Investment Strategy at ETF Securities, and Matt Collins, Director and Head U.S. Product Operations and Capital Markets at ETF Securities, will consider the current market environment of rising inflation pressures, go over the extended bull market conditions, and look to broad commodities allocations as a way to hedge against the potential risks ahead.
For example, ETF Securities recently came out with a line of ETFs to outperform the widely observed Bloomberg Commodity Indices without the need to worry about troublesome K-1 forms come tax season, including the actively managed ETFS Bloomberg All Commodity Strategy K-1 Free ETF (NYSEArca: BCI), ETFS Bloomberg All Commodity Longer Dated Strategy K-1 Free ETF (NYSEArca: BCD) and ETFS Bloomberg Energy Commodity Longer Dated Strategy K-1 Free ETF (NYSEArca: BEF).
BCI tries to provide long-term capital appreciation that exceeds the performance of the Bloomberg Commodities Index. It may not invest in all the components of the benchmark but will hold similar interests to those included in the index, along with short-term investment-grade fixed-income securities, money market instruments, certain bank instruments and cash or other cash alternatives.
The underlying Bloomberg Commodities Index tracks the price of rolling positions in a basket of commodity futures with a maturity between 1 and 3 months. BCD tries to provide long-term capital appreciation that exceeds the performance of the Bloomberg All Commodity Index 3 Month Forward Index, which tracks movements in the price of rolling position in a basket of commodity futures with a longer maturity between 4 and 6 months.Lastly, BEF tries to provide long-term capital appreciation designed to exceed the performance of the Bloomberg Energy Index 3 Month Forward Index, which tracks movements in the prices of rolling positions in a basket of energy commodity futures with a maturity between 4 and 6 months.
The funds will gain exposure to commodity futures contracts through a wholly-owned subsidiary of the fund, which invests directly in commodity-linked instruments. By indirectly gaining exposure to the commodities market through investing in the wholly-owned subsidiary, the suite of active commodity ETFs may avoid K-1 forms.
Commodities-related investments are seen as alternatives to traditional equity and fixed-income asset, helping investors diversify their investment portfolios with an alternative asset that provides little to no correlation to traditional stocks and bonds.
Financial advisors who are interested in learning more about commodities can register for the Tuesday, April 25 webcast here.