Aided by strong performance in the first four-plus months of the year, advisors are looking more closely at commodities. We believe most client portfolios remain dominated by equities and fixed income. However, many advisors recently told VettaFi they are more bullish than before.
During a webcast with abrdn in April, we asked “Do you plan on changing your portfolio’s commodity allocation?”. The most popular answer was yes with a planned increase (46%). Meanwhile 41% planned to keep the allocation the same. A smaller minority was not investing in commodities (11%) or aimed to decrease the allocation (2%).
It is possible that inflationary concerns are driving the interest.
Gold’s Performance Is Shining in 2024
The SPDR Gold Shares ETF (GLD) remains the largest commodity ETF, with $64 billion in assets. State Street Global Advisors also has the third largest gold ETF, the SPDR Gold MiniShares (GLDM). GLDM, which has a lower expense ratio than GLD, manages $7.5 billion. Both rose 17% year-to-date through May 20 and gold has hit record highs.
In the last four weeks, GLD has been the more popular of the pair gathering $530 million of new money, while GLDM has approximately $200 million of redemptions. However, since the beginning of the year, GLDM has been favored more by investors pulling in over $150 million. In contrast, GLD had $2.4 billion in net outflows.
There are also other gold ETFs advisors are considering including the iShares Gold Trust Micro (IAUM) and the GraniteShares Gold Trust (BAR). Both ETFs have seen net inflows in the last four weeks.
There are also single commodity ETFs focused on agriculture like the Teucrium Wheat Fund (WEAT). WEAT rose 2% in value to start 2024.
Taking a Diversified Index Approach to Commodities
While gold is easily accessible via ETFs, so are many other commodities like copper, corn, crude oil, natural gas, silver, and soybeans. Advisors can benefit from diversification using broad commodities ETFs.
The abrdn Bloomberg All Commodity Strategy K-1 ETF (BCI) is one of these funds. The $1.1 billion fund recently had 29% of its assets in energy, 29% in agriculture, 20% in precious metals, 20% in grains, and 16% in base metals. The index-based BCI was up 9.6% for the year as of May 20 and pulled in nearly $200 million of new money.
The Direxion Auspice Broad Commodity Strategy ETF (COM) takes a different index approach. The $280 million COM can be long or flat 12 commodities, based on trend analysis. Recently, COM was long copper, crude oil, gasoline, gold, heating oil, silver, and wheat. Meanwhile, the ETF was not exposed to corn, cotton, natural gas, soybeans, and sugar. COM was up 9.5% for the year.
Active Commodity ETFs
We have seen a growing supply of actively managed ETFs. While equity and fixed income ones have garnered the most attention, there are commodity funds to consider.
The Neuberger Berman Commodity Strategy ETF (NBCM) and the PIMCO Commodity Strategy Active ETF (CMDT) are two such examples. NBCM was the stronger performer of the duo thus far in 2024, rising 11%.
Alternatives Symposium – May 30
VettaFi is hosting an Alternatives Symposium on May 30 to help advisors understand the risks and reward opportunities of investing outside of equities and fixed income. We will have multiple sessions focused on commodities, but will also discuss covered calls, other options-based ETFs, and long-short strategies.
Experts from asset managers like abrdn, GraniteShares, Neuberger Berman and State Street Global Advisors will be joining us. I hope you will too. Register now.
For more news, information, and strategy, visit the Commodities Channel.