As we near the end of Q2 2022, the signs continue to point to persistent inflation as war and supply chain issues continue to impact the economy. Commodity cycles tend to be long in duration, yet not all investment strategies are created equal. Investors must find the right approach.
In the upcoming webcast, Inflation, War, and Supply Chain Shock: Navigating Commodities Markets, David Mazza, managing director and head of product at Direxion; Ed Egilinsky, head of alternatives at Direxion; and Tim Pickering, founder, president, and CIO at Auspice, will engage in a discussion centered around why investors can no longer ignore commodities, as well as learn about relevant commodity strategies financial advisors can use to access this crucial asset class.
For instance, the actively managed Direxion Auspice Broad Commodity Strategy ETF (COM) can help provide a 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 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 adverse effects of contagion and maximize the positive impacts 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.
Additionally, the recently launched Direxion Breakfast Commodities Strategy ETF (BRKY) is a first-of-its-kind ETF offering exposure to the commodities that are commonly included in breakfast. BRKY tracks the S&P GSCI Dynamic Roll Breakfast (OJ 5% Capped) Index, which includes a basket of six commodities, including corn, coffee, lean hogs (bacon), orange juice concentrate, sugar, and wheat, according to a statement from the firm.
The new fund provides access to commodities whose prices are increasing due to supply chain pressures, geopolitical tensions, and weather-related issues. In a period of persistent inflation, this basket of commodities may offer strong diversification characteristics, due to their non-correlated returns in comparison to stocks and bonds.
Financial advisors who are interested in learning more about the commodities market can register for the Thursday, June 30 webcast here.