In the latest episode of ETF 360, VettaFi head of research Todd Rosenbluth is joined by Abrdn’s director of investment strategy, ETFs Robert Minter, CFA, CMT, CAIA to discuss the abrdn Bloomberg Industrial Metals Strategy K-1 Free ETF (BCIM).
“We’ve seen demand for commodity ETFs rise sharply in 2022 after being out of favor with investors in prior years,” Rosenbluth noted, asking Minter what the drivers for that change are.
Minter sees the recent long period of disinflation as a critical driver, noting that “Investors have rediscovered the benefits of adding commodities to their portfolios.” Through early September, the S&P 500 was down 16%, the U.S. Aggregate Bond index was down 12%, but the Bloomberg commodity index is up 17%. Minter sees the performance as a big draw.
“Commodities allow you to get exposure to some of the inflation-generating sectors,” Minter said, pivoting to the genesis of BCIM as a tool for investors to get exposure to the energy transition through industrial metals. Minter observed that the U.S., Europe, and China amount for more than $52 trillion in GDP combined, noting, “They are all trying to get more renewable energy and move to a renewable economy all at the same time.” Regardless of the number one best-selling EV, it will require copper, aluminum, nickel, zinc, and other industrial metals to be produced, creating a strong case for those commodities. “These industrial metals are critical for getting us through the energy transition.”
Investors looking for longer-term, higher conviction plays can find a lot to like in BCIM. As a K-1-free product, it also has tax benefits. “This instrument does not have K-1s, which makes it a lot easier for advisors and investors at tax time,” Minter said.
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