Private investment manager Neuberger Berman has converted a $200 million mutual fund providing actively managed broad commodities exposure into a fully transparent ETF.
Private investment manager Neuberger Berman has completed its first mutual fund to ETF conversion.
The Neuberger Berman Commodity Strategy ETF (NBCM US) has been listed on NYSE Arca with an expense ratio of 0.65%.
The ETF’s price tag is cheaper than the fees charged on the various share classes under the mutual fund structure.
The fund will continue to be managed by Hakan Kaya, David Wan, and Michael Foster who average 21 years of industry experience and more than ten years investing in commodities.
The strategy, which has outperformed the benchmark Bloomberg Commodity Index by 0.94% per annum since its inception in August 2012, involves investing in derivatives to obtain risk-balanced exposure to a diversified portfolio of 29 commodities across seven major commodity sectors.
Short positions in individual commodities are allowed, although the strategy will primarily be long in nature.
Neuberger Berman assesses top-down macro variables to determine the fund’s allocation among commodity sectors along with individual commodity outlooks to take advantage of short and long-term opportunities. The strategy seeks further alpha by selecting the maturity of commodity derivative contracts based on the probability of backwardation.
The ETF also holds an actively managed portfolio of high-quality, short-duration fixed income instruments which are designed to serve as collateral for the derivative positions while also generating additional yield for the fund.
As of the end of September, over one-third (36.1%) of the strategy was allocated to commodities in the energy sector with significant exposure also to agricultural commodities (21.8%), precious metals (19.3%), and industrial metals (16.1%).
The largest single commodity positions were to gold (14.1%), gasoline (8.0%), corn (7.8%), heating oil (7.2%), Brent oil (6.8%), copper (6.1%), crude oil (6.1%), and gasoil (5.2%).
Scott Kilgallen, Head of North America Intermediary Client Coverage at Neuberger Berman, said: “Our firm continually assesses where our investment expertise intersects with client demand and preference for an ETF vehicle. Commodities can enhance strategic asset allocation by providing diversification benefits while potentially mitigating the effects of inflation.”
Neuberger Berman made its ETF debut in April with the launch of three actively managed thematic strategies targeting global stocks aligned with the themes of disruptive technologies, digitally connected consumers, and carbon transition infrastructure. The funds, which each come with an expense ratio of 0.55%, have yet to gather any significant assets under management.