Asset manager BlackRock has unveiled an exchange-traded fund (ETF) with a diversified exposure to commodity markets, which aims to give investors greater portfolio diversification.
The ETF, which is named the iShares Diversified Commodity Swap ETF, is exposed to 20 different commodities in five sectors, which are key to the global economy: energy, agriculture, industrial metals, precious metals and livestock. It will use unfunded total return swaps, as this method is seen as more practicable than holding physical commodities. The ETF will have a total expense ratio of 0.19% and aims to replicate the Bloomberg Commodity US Dollar Total Return index.
Fergus Slinger, co-head of iShares Sales EMEA, commented: “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.”