After an extended bull run in commodity prices in the wake of Russia’s invasion of Ukraine, the prices of oil, metals, and agricultural products have dropped since early June, driven in part by investor fears of a possible recession and a rallying U.S. dollar.
While the Invesco Optimum Yield Diversified Commodity Strategy No K-1 ETF (PDBC), the largest cross-commodity ETF on the market, saw outflows in June (as did other commodities funds), Kathy Kriskey, product strategist for commodities and alternatives ETFs at Invesco, said that the fund “hit a high AUM of $10 billion before the recent downturn.”
Appearing on “Bloomberg ETF IQ,” Kriskey explained that Invesco has “been building AUM” with PDBC “for the past 18 months.”
“People have had a big interest in commodities,” she said, adding that the reasons why PDBC had “seen such inflows” prior to June was because investors sought diversification, a hedge against inflation, and — when Putin invaded Ukraine — a geopolitical hedge.
Prior to the downturn, the S&P GSCI closed the month of May up 5.1%, bringing the index’s year-to-date performance to 47%.
PDBC seeks long-term capital appreciation and seeks to achieve its investment objective by investing in a combination of financial instruments that are economically linked to the world’s most heavily traded commodities. It offers exposure to commodity futures without the tax hassle of a K-1.
The fund also attempts to avoid “negative roll yield,” which could erode returns over time. PDBC has gained more than 42% year-to-date.
VettaFi recently polled advisors, and they said they prefer a broadly diversified commodities fund over one targeted to precious metals. Earlier this month, VettaFi’s head of research Todd Rosenbluth said on CNBC’s “ETF Edge” that PDBC’s exposure to not just precious metals but also to different sectors like agriculture and energy is what’s been appealing to advisors.
“We’re seeing advisors want that diversification,” Rosenbluth said. “They like gold, but they also want exposure to those other bond sectors.”
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