New diversified commodity ETF from BlackRock
BlackRock has launched an ETF offering exposure to a variety of commodity markets for investors seeking portfolio diversification tools, at a time when the correlation between historically uncorrelated asset classes is rising.
The iShares Diversified Commodity Swap UCITS ETF delivers exposure to 20 different commodities representing 5 sectors including: energy, agriculture, industrial metals, precious metals and livestock.
The fund seeks to replicate the performance of the Bloomberg Commodity USD Total Return Index. This index aims to represent commodities that are of importance and economic significance to the world economy, while capping each sector at 33 per cent and each single commodity at 15 per cent.
The fund uses unfunded total return swaps to achieve this exposure, which is more operationally practical than holding physical commodities such as precious metals or livestock. The fund has a total expense ratio of 0.19 per cent.
Fergus Slinger, Co-Head of iShares Sales EMEA, says: “Diversification is becoming more difficult to achieve due to increasing correlation between equities and bonds across global markets. This fund is a direct response to growing investor appetite for asset classes that offer stronger diversification impact in portfolios, and many are looking to commodities.
“By capping the single commodity and sector exposure in the fund, investors are not overexposed to a particular part of the market. It can therefore serve as an alternative to purchasing individual futures or investing directly in physical commodities.”