Teucrium Trading, a US-based issuer of commodity-focused ETFs, has launched a new fund providing actively managed exposure to a basket of agricultural futures.
The price of agricultural commodities has surged in recent months.
The Teucrium Agricultural Strategy No K-1 ETF (TILL US) has been listed on NYSE Arca with an expense ratio of 1.49%.
The fund is the sixth entry to Teucrium’s $1.1 billion suite of agricultural commodity ETFs. Four of the other ETFs individually target the futures markets for corn, wheat, soybean, and sugar, while the fifth fund – the $40 million Teucrium Agricultural Fund (TAGS US) – invests equally amongst the four single-commodity ETFs, rebalanced daily.
The newest addition, TILL, is similar to TAGS in that it also maintains approximately equal allocations to corn, wheat, soybean, and sugar, rebalanced monthly. The ETF typically owns just one contract per market.
However, the fund uses a proprietary model to actively manage its maturity exposure in each market, selecting the contract that is expected to best exploit the shape of that commodity’s futures curve.
Generally, when a market is in contango (longer-dated futures contracts have higher prices than shorter-dated contracts), the model will select a contract further out on the futures curve to minimize the implied rolling cost.
Conversely, when a market is in backwardation (longer-dated futures contracts have lower prices than shorter-dated contracts), the model will select a near-date contract to maximize the implied roll yield.
Jake Hanley, Managing Director and Senior Portfolio Strategist at Teucrium Trading, said: “TILL is a natural fit for our agricultural family of funds and is another example of our commitment to simplifying investor access to these markets.”
The ETF’s launch comes amid growing demand for exposure to commodities which is one of the only asset classes that have performed well so far this year. Agricultural commodities, in particular, have surged in recent months due to global supply and demand imbalances that have been exacerbated by weather-related disruptions and geopolitical events, most notably Russia’s invasion of Ukraine – the Bloomberg Agriculture Spot Index is up 25.6% year-to-date (13 May).
Hanley added: “Commodities, historically, have provided important diversification to portfolios, and data shows that they often outperform stocks during market corrections. With TILL, financial advisors will be able to include major food commodities in their model portfolios more easily, and establish long-term allocations to commodities to help increase portfolio resilience.”
TILL is also the first ETF from Teucrium to be registered under the Investment Company Act of 1940 which means it will issue a 1099 tax form rather than a K-1 tax form which some investors find cumbersome.