A commodity ETF can serve an important role in well-diversified portfolios.
As inflation shows signs of reaccelerating and energy prices surge, many investors are allocating to the Invesco Optimum Yield Diversified Commodity Strategy No K-1 ETF (PDBC). The fund is actively managed, allowing it to adjust exposure when market conditions warrant more exposure to a specific commodity.
“Commodities have rallied in recent months and PDBC has been among the stronger performers,” said Todd Rosenbluth, head of research at VettaFi. “Advisors are starting to remember benefits of having the asset class in a broadly diversified portfolio.”
PDBC has seen $296 million in net flows since September 1, partially offsetting outflows earlier in the year. The ETF notably accreted $1.8 billion in net flows in 2022 as commodities outperformed last year.
With $5.7 billion in assets under management, PDBC is the largest commodity ETF available to investors, according to ETF Database.
The fund offers exposure to 14 commodities, adjusting weighting as needed to accommodate the current environment. As of August 31, the fund has the most exposure to gasoline (12.66%), WTI crude oil (12.61%), and Brent crude (12.43%), which has led to its strong recent performance.
WTI crude, the U.S. benchmark, and Brent crude, the international benchmark, are on pace for the third straight weekly price gain.
WTI ended Thursday at $90.16, the highest settle since last November. Meanwhile, Brent crude settled at $93.70, notching a 10-month high. Energy commodities saw modest price gains in August, with crude oil and natural gas prices up 2.24% and 5.08%, respectively.
Inflation accelerated for the second consecutive month in August, with the increase largely driven by a spike in gasoline prices, which were up 10.6% during the month.
Commodity ETF Tax Treatment
Many investors shy away from commodity ETFs due to misconceptions that all commodity ETFs require investors to file K-1 tax forms. Notably, PDBC does not issue a K-1 form.
The ETF charges 59 basis points.
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