WisdomTree adds new broad commodities ETF with physical precious metals sleeve

Dec 7th, 2021 | By | Category: Commodities

ETF STRATEGY NEWS! ETF Strategy is delighted to announce the launch of ETF Strategy Hub (hub.etfstrategy.com), an on-demand repository of webcasts, videos, podcasts and white papers. Debuting with Special Series on Technology & Innovation in China and the Digital Economy.


WisdomTree has launched a new broad commodities ETF in Europe which uses physical replication to deliver exposure to the strategy’s precious metals component.

Alexis Marinof, Head of WisdomTree Europe

Alexis Marinof, Head of Europe, WisdomTree.

The WisdomTree Broad Commodities UCITS ETF has been listed on London Stock Exchange in US dollars (Ticker: PCOM LN) and pound sterling (COMX LN) and on Deutsche Börse Xetra (PCOM GY) in euros.

The fund is linked to the Bloomberg Commodity Total Return Index which covers 23 commodity futures across six major commodity sectors: energy, industrial metals, precious metals, grains, softs, and livestock.

The target weights for each commodity are determined annually and are designed to reflect each commodity’s liquidity and global economic significance (based on production data). No single commodity may account for more than 15% of the index, while no commodity sector may represent more than 33% of the total weight.

WisdomTree already offers a broad commodities ETF – the $150m WisdomTree Broad Commodities (AIGC LN). PCOM is different, however, in that exposure to the precious metals component is delivered through physical replication of gold and silver rather than via a swap on futures. The 2021 target weights of gold and silver in the index are 15% and 4%, respectively.

The physical replication of gold of silver is designed to potentially enhance overall performance by avoiding the rolling costs associated with commodity futures that are in contango (a situation where the futures price of a commodity is higher than the spot price).

Contango is generally a normal situation for durable and easily storable commodities which have a cost of carry – higher futures prices reflect these storage costs. Gold and silver both fit this description and tend to spend most of their time in contango.

Total return swaps based on futures are still used to deliver the performance of the index’s energy, industrial metals, and agricultural components.

The ETF comes with a management expense ratio of 0.19%.

Alexis Marinof, Head of Europe, WisdomTree, commented: “This launch brings together our expertise in physically-backed products and leadership position in synthetic commodities ETPs – complementing our smart beta broad commodities UCITS solution. PCOM takes an innovative approach in delivering access to broad commodities by providing exposure to the spot price of precious metals. Commodities are at the heart of our European business, and we remain committed to providing investors with access to unique strategies that add value to their portfolios.”

According to WisdomTree, broad commodity ETPs have attracted net inflows in excess of $12 billion this year as investors have become more aware of the role raw materials can play in navigating dynamic market conditions.

Nitesh Shah, Head of Commodities & Macroeconomic Research, Europe, WisdomTree, said: “Broad commodities have historically been one of the best hedges against inflation. Inflation in the US and Europe is running at the highest levels in over a decade, mainly driven by supply-side shocks, which commodities are uniquely positioned to protect against. Energy price spikes, drought-induced food price increases, and transit bottlenecks, for example, feed directly into commodity prices and the consumption baskets that inflation figures are calculated from. It’s not just these short-term phenomena that are driving commodity prices. An infrastructure renaissance combined with an energy transition could drive a super-cycle in certain commodities for the coming decade.”

Tags: , , , , , , ,

Leave a Comment