The magnitude of central bank stimulus across the globe over the past year is fueling inflationary expectations. Coupled with the potential for synchronized global growth and supply constraints, many are arguing that the next commodities supercycle is upon us.
In the upcoming webcast, Inflation, Mega-Stimulus, and the Commodities Supercycle, Ed Egilinsky, Head of Alternatives, Direxion; and Tim Pickering, Founder, President and CIO, Auspice, will discuss expectations for extraordinary global growth in a post-vaccine world, touch upon the role of commodities under the cloud of accelerating inflation, and offer a strategic, adaptive approach to whip-sawing commodity markets.
Specifically, the actively managed Direxion Auspice Broad Commodity Strategy ETF (NYSEArca: COM) can help try to provide total return that exceeds that of the Auspice Broad Commodity Index over a complete market cycle.
COM will maintain a portfolio similar to those included in the index through exchange traded commodity futures contracts, swap contracts, and investments in other investment companies or exchange traded notes to obtain exposure to the commodities market.
The underlying Auspice Broad Commodity Index is a rules-based index that utilizes a quantitative methodology to track a diversified portfolio of 12 commodity futures contracts dependent on the historical volatility of that component. The total index value and is independent of the volatility and position of other components. Each holding is then positioned either long or flat, depending on prevailing price trends.
The 12 commodities that comprise the index may include soybeans, corn, wheat, cotton, sugar, crude oil, natural gas, gasoline, heating oil, copper, gold, and silver.
Moreover, the benchmark includes a “smart” contract roll to minimize the negative effects of contagion and maximize the positive effects of backwardation in the futures market. Expiring futures contracts are replaced based on an optimization process that selects a contract from a universe of futures contracts within the next 13 month period.
The ETF will then try to exceed the return of the benchmark index through active management of a portfolio of Treasury bills, government securities, money market funds, cash, other short-term bond funds, highly rated corporate, or other non-government fixed income securities.
COM will also utilize a subsidiary for purposes of investing in commodity futures contracts, which is wholly owned and controlled by the fund. Since the ETF itself does not hold or trade futures contracts but does so through the subsidiary, investors are not subject to troublesome K-1 forms come tax season.
Financial advisors who are interested in learning more about commodity strategies can register for the Thursday, May 6 webcast here.
