First Trust Global Tactical Commodity Strategy (FTGC).
This actively managed exchange-trader does not invest directly in commodities; rather, it seeks an “attractive” risk adjusted total return through the use of commodities futures contracts and commodity-linked notes. Through active management as well as diversification, the portfolio management team looks to reduce overall volatility. Not surprisingly, the active management does not come cheap at a gross expense ratio of 0.95%. Nevertheless, the recent momentum is difficult to ignore. First Trust’s recently introduced commodity vehicle has handily outpaced diversified gems like Greenhaven Continuous Commodity (GCC).
What makes FTGC particular intriguing is the idea that it does not necessarily need to be fully invested at all times. An index-tracker like GCC does. In other words, the active managers of FTGC may opt to stay out of energy or industrial metals if they believe there is a reason to reduce risk. Or they might overweight precious metals. Meanwhile, the managers could overweight agriculture due to Ukraine’s leading position as a grains producer and due to drought conditions around the world.
Personally, my clients maintain a limited exposure to commodities. Moreover, FTGC is not on my “buy list.” I prefer passively managed index ETFs to the expensive counterparts. Still, the asset class maintains a very low correlation to stocks or bonds. To the extent another believes that commodity selection can improve performance in the space, FTGC could be a worthy addition for portfolio diversification.