abrdn, formerly Aberdeen Standard Investments, has expanded its range of commodity ETFs with a new fund providing low-cost exposure to a basket of industrial metals.
The fund is the cheapest ETF in the US providing diversified exposure to industrial metal commodities.
The abrdn Bloomberg Industrial Metals Strategy K-1 Free ETF (BCIM US) has been listed on NYSE Arca with an expense ratio of just 0.39%.
Steve Dunn, Head of ETFs at abrdn, said: “The world is at the early stages of a huge energy transition away from fossil fuels into more sustainable sources. Almost every renewable energy system uses large amounts of industrial metals, including electric vehicles, wind turbines, solar panels, grid-level batteries, and carbon capture systems.
“That huge, long term structural demand will drive significant new demand for industrial metals, a trend that this ETF opens investors up to.”
Methodology
The fund tracks the Bloomberg Industrial Metals Subindex which consists of commodity futures contracts on copper, aluminium, zinc, and nickel. The underlying futures contracts have maturity dates between one and three months and follow a fixed roll schedule throughout the year.
Bloomberg’s methodology aims to represent commodities according to their average liquidity, which accounts for two-thirds of the weighting formula, and their importance to the world economy, approximated by five-year US-dollar-weighted production data.
The current weights of the four industrial metals in the index are copper (35.1%), aluminium (30.4%), zinc (18.4%), and nickel (16.1%).
The fund also earns a yield on the high-quality short-term fixed income securities that are purchased and used as collateral for the fund’s futures positions.
The fund is organized under the Investment Company Act of 1940 with no Schedule K-1 meaning investors will instead deal with the less cumbersome 1099 tax form.
Its price tag means it is the cheapest ETF in the US to deliver diversified exposure to industrial metal commodities with its only competitor being the $430m Invesco DB Base Metals Fund (DBB US) at 0.84%. DBB tracks the DBIQ Optimum Yield Industrial Metals Index which provides exposure to aluminium, zinc, and copper futures contracts. The underlying contracts are rolled using an optimization process that seeks to exploit the shape of commodity futures curves.
abrdn offers a further seven commodity ETFs, presently still branded ‘Aberdeen Standard’, which collectively house $6.9bn in assets. These funds include two broad commodity ETFs as well as five precious metal ETFs providing exposure to gold, silver, platinum, palladium, and a basket of precious metals.