Industry’s Largest Commodity ETF Celebrates 10th Birthday

The $4.6 billion Invesco Optimum Yield Diversified Commodity Strategy No K-1 ETF (PDBC A-) launched on November 7, 2014. The fund has served as a diversifier and inflation hedge, among other roles, in portfolios for the past decade. 

The broad-basket commodity ETF charges 59 basis points, a competitive price for the category. PDBC is actively managed and provides exposure to the world’s most heavily traded commodities. This includes gasoline, Brent crude, NY Harbor ULSD, gold, WTI crude, copper, wheat, sugar, zinc, aluminum, soybeans, corn, natural gas, and silver. 

Interestingly, the Fed’s easing cycle may present upside opportunity for Invesco’s commodity ETF. Many believe 1995 to be the past easing cycle most reflective of the current macro environment. Looking back to 1995, commodities performed well after the initial rate cut. 

Less restrictive policy may provide a boost for commodities through increased economic activity, especially in a soft-landing scenario. Additionally, it may lift appetites for risk assets like commodities, according to Invesco.

For investors looking to add commodities exposure, it’s important to remember a small allocation to commodities goes a long way. An ideal allocation is 5% of a portfolio by weight, according to Invesco. This means that a disciplined investor will add exposure as it dips below 5%, but will also sell and decrease exposure as it creeps above 5%. 

Additionally, a broad-basket commodity ETF like PDBC can help investors avoid making tactical plays, which can be nearly impossible to time correctly. Investors may be best positioned by adding commodity exposure while prices dip rather than chasing commodities higher. 

Importantly, PDBC does not issue a K-1 due to its structure as a ‘40 Act product, which may be desirable for many investors. 

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