Commodity ETF tops $1bn month after launch


A Source commodity ETF product that launched just over a month ago has already hit $1bn, equivalent to more than half of the total European assets that went into broad commodity ETFs in 2016.

The Source Bloomberg Commodity Ucits ETF, which launched on 9 January, was touted for its low cost with ongoing charges of 0.19 per cent and a swap fee of 0.21 per cent.

The average European-domiciled commodity ETF has a management charge of 0.5 per cent, Morningstar data says, but the most expensive is 1.25 per cent. The cheapest is 0.19 per cent.

Morningstar figures show the Source ETF had hit $1bn by 10 February. According to Source figures, European investors placed almost $2bn in commodity ETFs in 2016.

“For a new launch in commodities that’s exceptional,” says Lynn Hutchinson, who leads the passive research programme at Charles Stanley.

“Commodities have had quite a bad few years so you’ve seen flows out rather than in. The fact that this has gathered lots of flows might mean investors are open to having them back in their portfolios.”

Regarding gold in particular, Hutchinson says products have seen a setback from US investors, but inflows continue from European investors.

The Bloomberg Commodity Index, which covers 20 different commodities, delivered positive returns of 11.8 per cent in 2016 following losses of 24.7 per cent in 2015. It delivered negative returns in 2014 and 2013 at -17.1 per cent at 9.5 per cent respectively.

Its largest holdings are in natural gas, Brent crude and gold, which all account for a 10 per cent of the index.

At the time of the ETF launch, Source said it had $4bn in commodity products.