Exchange-traded Funds  

Source unveils commodities ETF

Source unveils commodities ETF

Source has launched an exchange-traded fund that lets investors tap into commodities, a sector which has proven popular among European investors this year.

The new Source Bloomberg Commodity ex-Agriculture Ucits ETF gives diversified commodity exposure, while excluding agriculture and livestock.

According to Source, European investors have been increasing their exposure to commodities this year, as political uncertainty and high equity valuations spur many investors to step up the diversification of their portfolios.

The launch follows on from the success of the Source Bloomberg Commodity Ucits ETF, which has raised €1.2bn (£1.05bn) in assets since January.

Chris Mellor, product specialist at Source, said: “Commodities is a pretty broad asset class. Some investors want exposure to just one commodity, others want exposure to all of them, and others want to diversify but exclude some sectors."

The new Source ETF has a total cost of only 0.4 per cent per year, an ongoing charge of 0.19 per cent and swap fee of 0.21 per cent.

Mr Mellor said: “Many investors in Europe told us they wanted a simple, competitively priced commodity ETF that excluded the agriculture components. 

“Prior to this launch, the cheapest one in Europe charged around 19 basis points more than our fund.”

Scott Gallacher, chartered financial planner at Leicester-based Rowley Turton, said: "While commodities are arguably an alternative asset class, and one that may help diversify a portfolio, I would be reluctant to recommend a specific commodities ETF or fund.

"It creates not only the question of when to buy but also when to sell."

Mr Gallacher said he prefers to gain exposure to this asset class indirectly through multi-asset type funds where the fund manager has freedom to use the asset class when they feel it best adds value.