Source has launched a new commodity-focused exchange-traded fund on the London Stock Exchange which tracks the well-known Bloomberg Commodity Index and is the latest addition to the firm’s “portfolio essentials” range of ETFs.
The Bloomberg Commodity Index offers a diversified exposure to commodity markets with current exposures to the energy (36.0%), industrial metals (18.2%), agriculture (27.9%), precious metals (13.9%) and livestock (3.9%) sectors.
The Source Bloomberg Commodity UCITS ETF (LON: CMOD) offers exposure to over 20 different commodities at a total cost of 0.40% per annum (ongoing charges of 0.19% and swap fee of 0.21%).
Investors put almost $2bn into broad commodity ETFs last year but, according to Source, they may not be getting value for money.
“Commodity markets picked up in 2016, so it wasn’t a surprise to see new assets in broad commodity ETFs,” said Chris Mellor, Executive Director and Head of Equity Product Management at Source. “However, it is surprising how high the fees are on some broad commodity ETFs. Unlike many other providers, we disclose all fees in advance, so you can anticipate how each fund will perform relative to the index.
The index, denominated in US dollars, is one of several benchmarks for the broad commodity markets. It is well diversified and contains components in the agriculture (currently 27.9% index weight), energy (36.0%), industrial metals (18.2%), precious metals (13.9%) and livestock (3.9%) sectors. The index caps (max 15%) and floors (min 2%) the exposure of any one commodity in the index, resulting in a more balanced index weighting.
Reflecting the extended bear market in most commodities, the index was in steep decline between July 2014 and January 2016, losing 46.7% of its value between July 2014 and January 2016. The index has recovered since that point, rising by 20.9% over the past year.
ETF Securities and UBS also offer ETFs tracking the Bloomberg Commodity Index. The ETFS All Commodities (LON: AIGC) trades in USD and has a total cost of 0.49%. The UBS Bloomberg Commodity UCITS ETF (Six Swiss: DCUSAS) has a total cost of 0.37%. The fund trades in USD, GBP, CHF or EUR.
Another popular benchmark for the broad commodity market, the Thomson Reuters/CoreCommodity CRB Index, is tracked by the Lyxor Commodities CRB Thomson Reuters/Corecommodity UCITS ETF (LON: CRBU). The fund is offered with a total cost of 0.35%.