Source recognises commodity ETF growth

European investors have continued to increase their commodity exposure, with USD1.3 billion going into broad commodity ETFs in the first quarter of 2017 says ETF providers, Source.

This is quickly approaching the USD1.8 billion invested in the whole of 2016, which was itself a strong year for commodities, the firm writes. Chris Mellor, product specialist at Source, says: “It’s clear that investors wanting to diversify their portfolios are turning to commodities. That makes sense given the low correlation commodities have with equities and bonds, and especially now that some equity valuations may look stretched.”

The vast majority of this year’s broad commodity flows have been into ETFs tracking the Bloomberg Commodity Index (“BCOM”), with the Source Bloomberg Commodity UCITS ETF raising over USD1 billion since its launch in January 2017. This made it the most successful ETF launch in the past five years, the firm writes.
Investors interested in the fund now have a choice between GBP and USD trading currencies, both now available on the LSE. With a total cost of 0.40 per cent per annum (an ongoing charge of 0.19 per cent and swap fee of 0.21 per cent), the fund is cheaper than other broad commodity ETFs, the firm says.

Mellor says: “Investors have been crying out for a more competitively priced, simple commodity ETF. Prior to this launch the lowest cost commodity ETF in Europe had an ongoing charge of 0.35 per cent and a total cost of 0.75 per cent per annum, almost twice as much as our fund.”

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Beverly Chandler
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