Commodities can play several roles in a portfolio with the potential for diversification, inflation hedging and growth opportunities.
We are one of the largest providers of commodity exchange-traded products in Europe.i
For over 15 years, we have offered products that provide exposure to the commodities marketii
Our innovative carbon tilted ETF targets a 20% reduction in implied GHG emissions per unit of production.iii
We offer a range of broad commodity ETFs and single commodity ETCs, including the largest physical gold product and the largest ETF tracking the flagship Bloomberg Commodity Index (BCOM) in Europe.1
Our ETF tracks an index comprised of the same 24 commodities as the standard BCOM index but adjusts allocation to each commodity based on the amount of greenhouse gas (GHG) emissions per unit of production, whilst maintaining similar weightings at the overall sector level compared to the standard BCOM index.
Our ETF tracks the highly liquid and diversified BCOM, one of the most popular broad commodity indices, covering up to 24 eligible agriculture, livestock, metals and energy-related commodities.
Our ETF tracks the Bloomberg Commodity ex-Agriculture and Livestock 20/30 capped Index, comprised of 13 commodities across energy, industrial metals, and precious metals.
An investment in these funds is an acquisition of units in a passively managed, index tracking fund rather than in the underlying assets owned by the fund.
Secured by gold bullion, our ETC provides one of the lowest overall cost exposures to the gold price in Europe, enabling you to gain exposure to gold price movements without having to buy and store physical gold yourself. Our ETC aims to hold only gold that has been sourced post-2012, in adherence to the LBMA’s Responsible Gold Guidance.
For complete information on risks, refer to the investments risks below. The value of investments, and any income from them, will fluctuate. This may partly be the result of changes in exchange rates. Investors may not get back the full amount invested.
The most popular way most investors gain exposure to commodities is through exchange-traded products. You can gain exposure to a single commodity’s price via an exchange-traded commodity (ETC) or to a basket of commodities, such as those represented by the BCOM Index, via an ETF.
Commodities are generally raw materials and can be grouped into energy (e.g. crude oil, natural gas), metals (e.g. gold, aluminium, copper) and agricultural commodities (e.g. corn, cotton, live cattle).
Commodity indices typically measure commodity futures performance. Futures are contracts to receive (or deliver) commodities at a specified future date and price.
Direct (physical) investing in many commodities is challenging for many reasons, e.g. cost of storage, delivery, and so on. So, by investing in futures contracts, you can gain exposure to commodities without having to own the physical underlying asset and the difficulties that come with it.
As measured by inflation beta2 from 1998 to 2022, commodities are historically the most efficient hedge for inflation of any major asset class, even when compared to common inflation-fighting instruments, like Treasury Inflation-Protected Securities (TIPS) 3, real estate investments trusts (REITs) 4, and gold.5 This is because commodities are raw materials used as inputs in housing, transportation and food – all components of the CPI. In addition, inflation shocks are usually the by-product of stronger-than-expected demand and/or supply uncertainty, all of which may boost the price of goods.
Given the global reach of commodities, commodity prices have many drivers. However, some of the key influencing factors include:
Greenhouse gases (GHG) are naturally occurring gases in the atmosphere, which absorbs and re-emits heat, contributing to the warming of the earth. Examples include carbon dioxide and methane. Carbon is a chemical element that is present in many, but not all, greenhouse gases. For the purposes of analysing what investors understand as the ‘carbon footprint’ of a commodity portfolio, GHG emissions data provides a representative metric.
These are physically backed exchange traded certificates (ETCs) that can be bought and sold on exchange. Certificates in the ETCs are a type of debt instrument and are secured by a pool of collateral (the underlying precious metal), which is held on trust by the trustee for itself, the certificate holders and other parties.
An introduction to commodities
The most popular way most investors gain exposure to commodities is through exchange-traded products. You can gain exposure to a single commodity’s price via an exchange-traded commodity (ETC) or to a basket of commodities, such as those represented by the BCOM Index, via an ETF.
Monthly gold update
Gold rose 4.2% in October, once again setting new records, despite the US Dollar and Treasury bond yields rising in the month, which would typically be headwinds to the yellow metal. The more powerful drivers were geopolitical, especially further escalation in the Middle East conflict and uncertainty ahead of the US Presidential election. Discover insights into the key macro events and what we think you should be keeping your eyes on in the near term.
i Source: Invesco, total AUM in commodity ETFs and precious metal ETCs domiciled in Europe, as at 30 September 2024.
ii Source: Invesco, Bloomberg. Invesco Physical Gold ETC launched 24 June 2009.
iii Source: Bloomberg Professional Services, Index Methodology: Bloomberg Commodity Carbon Tilted Indices, May 2023.
Any investment decision should take into account all the characteristics of the funds as described in the legal documents. For sustainability related aspects, please refer to https://www.invescomanagementcompany.ie/dub-manco. An investment in these ETFs is an acquisition of units in a passively managed, index tracking fund rather than in the underlying assets owned by the ETFs
1 Invesco, as at 30 September 2024.
2 Inflation beta is a metric used to evaluate an asset class’s ability to hedge inflation. It measures the change in inflation against the return of the asset class over a specific time period.
3 The value of inflation-linked securities will fluctuate in response to changes in real interest rates, generally decreasing when real interest rates rise and increasing when real interest rates fall. Interest payments on such securities generally vary up or down along with the rate of inflation. Real interest rates represent nominal (or stated) interest rates reduced by the expected impact of inflation.
4 REITs are pooled investment vehicles that trade like stocks and invest substantially all their assets in real estate and may qualify for special tax considerations. REITs are subject to risks inherent in the direct ownership of real estate. A company’s failure to qualify as a REIT under federal tax law may have adverse consequences for the REIT’s shareholders. REITs may have expenses, including advisory and administration, and REIT shareholders will incur a proportionate share of the underlying expenses.
5 Sources: Bloomberg L.P. and US Bureau of Labor Statistics, as of December 2022.
For complete information on risks, refer to the legal documents.
Value fluctuation: The value of investments, and any income from them, will fluctuate. This may partly be the result of changes in exchange rates. Investors may not get back the full amount invested.
Commodities: Instruments providing exposure to commodities are generally considered to be high risk which means there is a greater risk of large fluctuations in the value of the instrument.
For all ETCs in the Invesco Precious Metal ETC range only
Limited recourse: If the issuer cannot pay the specified return, the proceeds from the sale of the precious metal will be used to repay investors. Investors will have no claim on the other assets of the issuer.
For all ETFs in the Invesco Broad Commodity ETF range
Synthetic ETF Risk: The fund might purchase securities that are not contained in the reference index and will enter into swap agreements to exchange the performance of those securities for the performance of the reference index.
Use of derivatives for index tracking: The Fund’s ability to track the benchmark’s performance is reliant on the counterparties to continuously deliver the performance of the benchmark in line with the swap agreements and would also be affected by any spread between the pricing of the swaps and the pricing of the benchmark. The insolvency of any institutions providing services such as safekeeping of assets or acting as counterparty to derivatives or other instruments, may expose the Fund to financial loss.
For the Invesco Bloomberg Commodity UCITS ETF EUR hdg only
Currency Hedging - ETFs: Currency hedging between the base currency of the Fund and the currency of the share class may not completely eliminate the currency risk between those two currencies and may affect the performance of the share class.
For the Invesco Physical Gold Euro Hedged ETC and Invesco Physical Gold GBP Hedged ETC only
Currency hedging - ETCs: Currency hedging between the currency in which the underlying precious metal is typically quoted and the currency of the certificates may not completely eliminate the currency fluctuations between those two currencies and may affect the performance of the certificates.
For the Invesco Bloomberg Commodity Carbon Tilted UCITS ETF only
New commodity risk: Exposure to commodities might result in the Fund being more impacted by natural disasters and tariffs or other regulatory developments. This may result in large fluctuations in the value of the Fund.
GHG Emissions risk: The Fund may perform differently to other commodity funds, such as underperforming in comparison to other commodity funds that do not seek to weight commodity futures based on their respective GHG Emissions.
Data as at 30 September 2024, unless otherwise stated.
For information on our funds and the relevant risks, refer to the Key Information Documents/Key Investor Information Documents (local languages) and Prospectus (English, French, German), and the financial reports, available from www.invesco.eu. A summary of investor rights is available in English from www.invescomanagementcompany.ie. The management company may terminate marketing arrangements.
All investment decisions must be based only on the most up to date legal offering documents. The legal offering documents (Key Information Document (KID), Base Prospectus and financial statements) are available free of charge at our website www.invesco.eu and from the issuers.
This is marketing material and not financial advice. It is not intended as a recommendation to buy or sell any particular asset class, security or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication. Views and opinions are based on current market conditions and are subject to change.
UCITS ETF’s units / shares purchased on the secondary market cannot usually be sold directly back to UCITS ETF. Investors must buy and sell units / shares on a secondary market with the assistance of an intermediary (e.g. a stockbroker) and may incur fees for doing so. In addition, investors may pay more than the current net asset value when buying units / shares and may receive less than the current net asset value when selling them.
“BLOOMBERG®” and the Bloomberg indices listed herein (the “Indices”) are service marks of Bloomberg Finance L.P. and its affiliates, including Bloomberg Index Services Limited (“BISL”), the administrator of the Indices (collectively, “Bloomberg”) and have been licensed for use for certain purposes by Invesco Markets plc hereof (the “Licensee”). Bloomberg is not affiliated with Licensee, and Bloomberg does not approve, endorse, review, or recommend the fund named herein (the “Fund”). Bloomberg does not guarantee the timeliness, accuracy, or completeness of any data or information relating to the Funds.
For the full objectives and investment policy please consult the current prospectus.
This document has been communicated by Invesco Investment Management Limited, Ground Floor, 2 Cumberland Place, Fenian Street, Dublin 2, Ireland, Regulated by the Central Bank in Ireland.
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