BlackRock launches iShares diversified commodities ETF

Jul 27th, 2017 | By | Category: Commodities

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BlackRock has launched the iShares Diversified Commodity Swap UCITS ETF (LON: ICOM), providing exposure to a variety of commodity markets by synthetically replicating the well-known Bloomberg Commodity Total Return Index.

BlackRock launches iShares diversified commodities ETF in London

The Bloomberg Commodity Index tracks 20 different commodities from across the energy, agriculture, industrial metals, precious metals and livestock sectors.

The index tracks 20 different commodities from across the energy, agriculture, industrial metals, precious metals and livestock sectors. It weights constituents according to the economic significance of each commodity to the world economy, while capping each sector at a maximum 33% and each single commodity at 15%.

“By capping the single commodity and sector exposure in the fund, investors are not overexposed to a particular part of the market,” said Fergus Slinger, co-Head of iShares sales EMEA. “It can therefore serve as an alternative to purchasing individual futures or investing directly in physical commodities.”

The agriculture and energy sectors represent the largest segments within the index, with approximately 30% and 27% weights respectively. The next largest sectors are industrial metals (18%) and precious metals (16%), while livestock (7%) plays a lesser role in the index.

The largest single commodity exposure is to gold (12%) while copper, corn and natural gas each account for approximately 8% of the total index weight. Brent Crude and WTI Crude account for roughly 7% and 6% respectively (All data as of 30 June 2017).

ICOM has a total expense ratio (TER) of 0.19%. It trades in US dollars but is also available in a pound sterling-denominated share class under the ticker COMM.

BlackRock notes the fund may prove popular with investors seeking portfolio diversification tools at a time when the correlation between historically uncorrelated asset classes – most notably equities and fixed income – is rising.

Slinger added: “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. Many investors are looking to commodities.”

Source, ETF Securities and UBS also offer ETFs in Europe which track the same Bloomberg Commodity Index. The largest is the Source Bloomberg Commodity UCITS ETF (LON: CMOD) with $700 million in AUM. It trades in US dollars and has a TER of 0.40%. The UBS Bloomberg Commodity UCITS ETF (SIX: DCUSAS) is slightly cheaper with a TER of 0.37%. It has $270m in AUM and trades in US dollars, British pounds, Swiss francs or euros.

Another popular benchmark for the broad commodity market, the Thomson Reuters/CoreCommodity CRB Index, is tracked by the Lyxor Commodities CRB Thomson Reuters/Corecommodity UCITS ETF (LON: CRBU). The fund is offered with a TER of 0.35%.

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