Invesco, a top global asset management firm, has expanded its commodities ETF suite with the launch of the Invesco Agriculture Commodity Strategy No K-1 ETF (PDBA).
PDBA seeks long-term capital appreciation by investing indirectly via a subsidiary in commodities futures, collaterals such as cash, and high-quality securities that are linked economically to the agriculture industry. Through the futures, the fund has exposure to 11 different grains, soft commodities, and livestock, all while bypassing the need for a K-1 tax form.
“Invesco Agriculture Commodity Strategy No K-1 ETF builds on our history of strategically launching new commodity ETFs that pioneer easy and cost-effective exposure to sectors, like agriculture, that may otherwise be difficult for investors to access,” Anna Paglia, global head of ETFs and indexed strategies at Invesco, said in the press release.
It’s an actively managed fund that seeks to outperform the DBIQ Diversified Agriculture Index Excess Return, an index that is comprised of the 11 most highly traded agricultural commodities globally. These are corn, wheat, Kansas City wheat, soybeans, sugar, cocoa, coffee, cotton, live cattle, feeder cattle, and lean hogs.
As the fund is actively managed, the portfolio manager is able to respond to changes in both the commodities markets and commodity forward curves. PDBA will largely be positioned with holdings and weights that reflect its benchmark, but it may not hold them in the same proportions or have all of the holdings that the benchmark does at any given time.
“Agriculture may be one of the most important sectors of the global economy. Recent geopolitical events coupled with climate change and extreme weather have created supply constraints and price volatility, directly impacting the global grains trade,” said Kathy Kriskey, product strategist, commodities and alternatives ETFs at Invesco, in the press release.
PDBA is structured as a 1940 Act Fund and does not invest directly in physical commodities, commodities futures, or commodities-linked securities but instead goes through its wholly owned and operated subsidiary under Cayman Islands law. This means that the fund issues a 1099 tax form as opposed to a Schedule K-1, something that some investors prefer come tax time.
The difference in tax structures will allow investors the opportunity to now choose between PDBA and the Invesco DB Agriculture Fund (DBA), which is structured as a 1933 Act Commodity Pool and issues a K-1.
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