VettaFi’s Head of Research Todd Rosenbluth discussed the abrdn Bloomberg All Commodity Strategy K-1 Free ETF (BCI) on this week’s “ETF of the Week” podcast with Chuck Jaffe of “Money Life.” The pair talked about several topics regarding the fund to give investors a deeper understanding of the ETF overall.
Chuck Jaffe: One fund… on points for today. The expert to talk about it. Welcome to the end of the week. Yes, it’s an ETF of the week where we examine trending news. News for the unique and intriguing exchange traded funds with Todd Rosenbluth, the head of research at verify and at VettaFi.com. You’ll find all the tools and research that you need to be a savvier, smarter investor in exchange traded funds.
Todd Rosenbluth, great to chat with you again.
Todd Rosenbluth: It’s my pleasure to be with you.
Chuck Jaffe: Your ETF of the week is.
Todd Rosenbluth: BCI. That’s a ticker symbol for a mouthful. The Aberdeen or Aberdeen. The Aberdeen Bloomberg All Commodity Strategy K1 free ETF
Chuck Jaffe: Now, commodities, right now Todd, I won’t say they’re all the rage, but I’m hearing a lot about them, that’s for sure. So, is this first a commodity play? Then, we need to dig into the bells and whistles that made you pick this over other commodity funds.
Todd Rosenbluth: This is a commodity opportunity for investors and advisors. We verified recently how they webcast, and what we heard was that advisors were interested in increasing their exposure to commodities. This is an ETF that’s well diversified. It benefits from the rising prices that we’ve seen for gold, energy and copper because this holds exposure to a number of different commodities.
Chuck Jaffe: And you get the benefits of diversification. And as we’ll dig into some of what’s inside the fund. We like that it verified. That said, K1 is free. That’s about taxation and what you’re going to wind up getting. That’s just trying to avoid some pain, like paperwork. Pain. Right. It’s not really that that’s going to change the way this fund invests, is it?
Todd Rosenbluth: No, you’re correct. So if taxes can become a challenge when you’re investing in certain commodity ETFs. We’ve seen an evolution in the ETF industry where more products have come out that are K-1 free. I want to get into the weeds on this. This just will give you an ETF or traditional ETF experience despite investing in commodities. And that should be a benefit to all investors.
Chuck Jaffe: When people look at a commodities fund, there are some commodities funds that are focused on the obvious. They’re focused on gold and precious metals, which, oh, by the way, you can get in other funds or you can specialize in. And then there are some that are, you know, gravitating towards everything when you’re looking at this as a commodity play, I mean, how diversified is it and is it giving you exposure to everything you want and need?
Todd Rosenbluth: I think you’re getting the benefits of diversification is exposed to energy, oil prices and natural gas. It’s exposed to precious metals, not just gold. you get exposure to the various agricultural products that there are commodity futures tied to. And some other is that I’m failing to remember in specifics. You get broad diversification with BCI, and that’s beneficial.
Chuck Jaffe: Yes. We’ve seen strong prices for gold. Gold has actually outperformed some of the agricultural commodities. I’m not smart enough to tell you which one is going to perform the best between now and the end of the year. If you’re looking for a core position to have a slice of your portfolio, this is a great product to be able to do that.
Todd Rosenbluth: And the team at Aberdeen has a long history of offering commodity products, so we think they’re a good partner to consider.
Chuck Jaffe: Commodities. Historically volatile. Now, you and I have talked in the past, and you are not a trend follower. You are not somebody that says. Hey, stick around a 200-day moving average, though you like it. If folks want to do that sort of thing. But that means that if I’m not going to wind up saying, hey, I’ve got an exit point or something, if this gets hairy, I certainly want to control how much of a portfolio I want it to be.
So how does this play with the other things in a portfolio? What am I doing to make sure I’m getting the most out of it? How much of a portfolio are you letting this be? And do you add this if you’ve already got, you know, gold and precious metals and the rest all hanging around?
Todd Rosenbluth: So we find that most investors have something close to a 60% equity, 40% fixed income. With their exposure to, to get broad diversification, we think commodities can fit in in a low single-digit percentage. Provide some diversification. We certainly saw it a couple of years ago. The stock market and the bond market were both down in value, and commodities were a safe haven.
They benefited during inflationary times. Given the uncertainty geopolitically, as well as from a financial and monetary policy standpoint this year, we’ve seen commodities do well, even though the equity market has done quite well as well. I think you can get, you know, high single-digit percentage returns, if not more, from various commodity ETFs.
Here, you’re getting the benefits of broad commodity diversification with this Aberdeen product, BCI. So gold might do better than agriculture might do better than energy in certain time periods, or might fall out of favor. You can spread that risk around and not have the same level of volatility with a more broadly diversified commodity type. And this is tracking an index.
So you’re not taking and I’m making calls on individual commodities or tapping into someone who’s doing that. You’re getting broad market exposure. Think of this as a version of the S&P 500.
Chuck Jaffe: Yeah, and that’s important because commodities are an area where if you want to go active, if you want somebody to go. Oh, now we want to be in precious metals. Next, we want to be in corn. Okay. That’s a strategy worth following potentially. But it’s very different from this strategy. And is there for you an upper limit to what this would be in somebody’s portfolio.
Because this is kind of your introductory go get an exposure to commodities kind of thing. If you don’t have one, and a lot of people don’t, this might be the way to do it. But is there do you make this 5%? Could this be. And I recognize you can’t make it specific, but to you, is there a spot where you go not more than X.
Todd Rosenbluth: I think this is a small slice of the portfolio. I think I could see 5% making sense, for investors. And you asked the question earlier. What if you already own a gold ETF like GLD or some of the other products that are out there? This can complement that because there are certain time periods when energy or agricultural commodities are going to do better than gold.
So you probably want to have a single-digit percentage at most exposure to commodities and focus as much on equity and fixed income. But diversification matters. Asset allocation matters. It’s hard to know which ones are going to do best. And through a product like BCI, you can get that. And we’re going to talk more and more about commodity ETFs.
Chuck Jaffe: I think we’re going to have this come out on Thursday, which is when we’re going to have an alternative symposium at verify folks and go to ETF Transcom and hear from the Aberdeen team directly.
Yes. This ETF of the week is out on May 30th. Look for unverified.com again. It’s the BCI, the Aberdeen Bloomberg All Commodity Strategy K1 free ETF, the ETF of the week from Todd Rosenbluth at Verify Todd. Talk to you next week.
Todd Rosenbluth: See you next week, Chuck.
Chuck Jaffe: The ETF of the Week is a joint production of VettaFi and Money Life with Chuck Jaffe. That’s me. You can read all about my hour-long weekday podcast by going to MoneyLifeShow.com, or by searching wherever you find great podcasts.
Now if you’re searching for great information on ETFs, make sure you check out VettaFi.com, as they have that great information and a full suite of tools that’s going to help you be a better investor in ETFs. They’re on Twitter or X at @Vetta_Fi. Todd Rosenbluth, their head of research, is my guest; he’s on Twitter too. He’s at @ToddRosenbluth.
The ETF of the Week is here for you every Thursday. Make sure you don’t miss an episode by following along on your favorite podcast app. We’d love to have you here every week. And until next week, happy investing, everybody!
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