WisdomTree updates its $100m broad commodity ETF

Dec 24th, 2020 | By | Category: Commodities

WisdomTree has reorganized its $100 million actively managed broad commodity ETF with the fund adopting a revised investment approach.

Commodity ETFs: It pays to do the research

The reorganized fund provides greater commodity diversification and an enhanced rolling strategy.

Previously known as the WisdomTree Continuous Commodity Index Fund (CCIF US), the fund has become the WisdomTree Enhanced Commodity Strategy Fund (GCC US).

GCC remains actively managed and continues to gain its exposure to commodities through a basket of futures contracts.

The fund will, however, offer greater diversification by covering at least 25 different commodities (in contrast to 17 commodities for CCIF) across five major sectors: Energy, Agriculture, Precious Metals, and Industrial Metals.

The new ETF will emphasize different commodities compared to its predecessor, notably reducing its exposure to Energy sector commodities in response to the ongoing climate transition and decarbonization process.

Instead, the fund will focus on hard assets and Precious Metals to preserve purchasing power, as well as Industrial Metals like copper, aluminum, and nickel to capture the upside from an acceleration in global economic growth.

Target sector weights are determined annually in December and are driven by macro-economic outlook, single commodity outlooks, liquidity, and economic significance. The recently updated target weights are Energy (20%), Agriculture – Grains (18%), Agriculture – Softs (7%), Agriculture – Livestock (5%), Precious Metals (28%), and Industrial Metals (22%).

Jeremy Schwartz, WisdomTree Global Head of Research, said, “The Enhanced Commodity Strategy Fund provides commodity exposure across all major sectors while recognizing through its exposures the shifting commodity demand from new technologies in electronic devices, electricity delivery and storage, transportation, communication, and manufacturing.”

When rolling futures, the ETF has abandoned the fixed mechanism based on front-month contracts in favour of a more dynamic maturity selection process. Positions are reviewed monthly and applicable futures are rolled into the maturity that maximizes carry, enhances return, and lowers volatility. During this process, tactical sector tilts may also be implemented.

The ETF is organized under the Investment Company Act of 1940 with no Schedule K-1.

It comes with an expense ratio of 0.55%.

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