Commodities funds have been doing well this year, while stock and bond markets have bounced around in bear markets. While the S&P 500 is down nearly 17% this year, the S&P GSCI is up more than 10%.
Part of this is because those supply-chain issues that are bogging down stocks and bonds are driving commodities prices up. The Invesco Optimum Yield Diversified Commodity Strategy No K-1 ETF (PDBC), the largest cross-commodity ETF on the market, is up more than 22% so far this year.
But it’s important to remember that while many ETFs do not have to pay out cap gains distributions, most commodities ‘40-Act funds do — and those distributions get taxed. So, despite most investment portfolios likely facing losses this year, PDBC will most likely pay (taxable) capital gains to its shareholders.
Meanwhile, the Neuberger Berman Commodity Strategy ETF (NBCM) will not, since its distributions were already paid out when it was a mutual fund (Neuberger Berman converted the strategy into an ETF in October). So, for investors who want to gain the same exposure they’d get from PBDC but without the capital gains distributions, this new ETF from Neuberger Berman may be worth looking into.
NBCM invests in commodity-linked derivatives with an active risk-balanced, diversified approach that seeks to minimize the effects of market volatility. Tactical exposure adjustments expand potential alpha sources by considering top-down macro variables among commodity sectors, along with individual commodity outlooks to take advantage of short- and long-term opportunities.
The fully transparent active ETF’s fixed income holdings are actively managed and designed to preserve capital and serve as collateral for the ETF’s derivative positions while also seeking to generate additional yield. The fund will continue to be managed by Hakan Kaya, David Wan, and Michael Foster.
“Advisors have seen the benefits of adding in broad commodities ETFs into client portfolios in 2022 to offset the pressure of falling equity and bond prices,” said Todd Rosenbluth, head of research at VettaFi. “It’s exciting to watch Neuberger Berman further penetrate the ETF market given its strong brand and investment expertise.”
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