As we approach the end of the second quarter of 2022, signs continue to point to lingering inflation as war and supply chain issues continue to impact the economy. Commodity cycles tend to be long, but not all investment strategies are created equal. Investors need to find the right approach.
In the next webcast, Inflation, War, and Supply Chain Shock: Navigating Commodity Markets, David Mazza, managing director and product manager at Direxion; Ed Egilinsky, Head of Alternatives at Direxion; and Tim Pickering, Founder, Chairman and CIO of Auspice, will engage in a discussion focused on why investors can no longer ignore commodities, as well as relevant strategies that financial advisors can use to access this crucial asset class.
For example, active management Direxion Auspice Broad Commodity ETF (COM) can help provide a higher total return than the Auspice Broad Commodity Index over a full market cycle.
COM will maintain a portfolio similar to those included in the index through exchange-traded commodity futures, swap contracts and investments in other investment companies or exchange-traded notes to obtain exposure to the commodities market.
The underlying Auspice Broad Commodity Index is a rules-based index that uses a quantitative methodology to track a diversified portfolio of 12 commodity futures contracts based on the historical volatility of that component. The total value of the index is independent of the volatility and position of the other components. Each position is then positioned either long or flat, depending on prevailing price trends.
The 12 commodities that make up the index can include soybeans, corn, wheat, cotton, sugar, crude oil, natural gas, gasoline, fuel oil, copper, gold and gold. silver.
Additionally, the benchmark includes “smart” contract rollover to minimize the adverse effects of contagion and maximize the positive impacts of forwarding on the futures market. Expiring futures contracts are replaced based on an optimization process that selects a contract from a universe of futures contracts within the next 13-month period.
Additionally, the recent launch Direxion Breakfast Commodities Strategy ETF (BRKY) is a one-of-a-kind ETF offering exposure to commodities that are typically included in breakfast. BRKY tracks the S&P GSCI Dynamic Roll Breakfast Index (OJ 5% Capped), which includes a basket of six commodities, including corn, coffee, lean hogs (bacon), orange juice concentrate, sugar and wheat, according to a statement from the solidifier.
The new fund provides access to commodities whose prices are rising due to supply chain pressures, geopolitical tensions and weather-related issues. In times of persistent inflation, this basket of commodities can offer strong diversification characteristics, due to their uncorrelated returns relative to stocks and bonds.
Financial advisors interested in learning more about the commodities market can register for the Thursday, June 30 webcast here.