Elkhorn has partnered with Dorsey Wright & Associates and Research Affiliates Fundamental Indexes to launch two new actively managed commodity-related exchange traded funds.
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On Tuesday, Elkhorn rolled out the Elkhorn Commodity Rotation Strategy ETF (NasdaqGM: DWAC) and Elkhorn Fundamental Commodity Strategy ETF (BATS: RCOM). DWAC has a 0.99% expense ratio and RCOM comes with a 0.75% expense ratio.
The two actively managed commodity ETFs have different takes on the commodities markets. DWAC, which is based off Dorsey Wright & Associates momentum-based investing style, takes the top five commodities within the S&P GSCI Index based on relative strength metrics.
“I have long been a believer in tactical opportunities within the commodity market,” Tom Dorsey, Founder of Dorsey Wright & Associates, a Nasdaq Company, said in a press release. “We have built commodity-based models for decades, yet this is the first ETF based on our commodity research. For investors unsure of how to invest in commodities, DWAC’s strategy gives investors dynamic exposure to the commodity marketplace.”
The DWA relative strength model evaluates a universe of 21 commodities and provides equal-weighted exposure to the five commodities that exhibit the highest relative strength – a momentum investing technique that compares the performance of a security to the overall market. A relative strength or momentum strategy basically bets on high flying securities that will fly to new heights.
Currently, DWAC holds a 21.3% tilt toward coffee, 20.9% cotton, 20.3% sugar, 19.4% silver and 18.1% zinc. The portfolio will be rebalanced on a monthly basis.
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The Fundamental Commodity Strategy ETF is based on Research Affiliates’ fundamental research and will try to outperform the Dow Jones RAFI Commodity Index. Specifically, RCOM is designed to be a fundamental factor-weighted, broad-market commodity strategy with a modified dynamic roll to diminish the negative effects of contango in the futures market – contango refers to the effect where later-dated futures contracts are more expensive than near-term contracts.
“Much is made of smart beta strategies within equities and increasingly bonds,” Rob Arnott, Chairman and Chief Executive Officer of Research Affiliates, said in a press release. “The need for smart beta strategies within broad commodities, however, has largely been overlooked. We believe commodities can be a powerful inflation hedge and diversifier. Commodities can also offer excellent long-term return potential, especially from current levels, especially if the index rebalances against fads and bubbles.”
RCOM’s current holdings include soybeans 18.9%, gold 13.3%, copper 12.0%, WTI crude oil 7.0%, Brent crude oil 5.5%, silver 4.9%, sugar 4.7%, aluminum 4.7%, natural gas 3.7% and zinc 3.4%. The portfolio is rebalanced on a monthly basis.
For more information on new fund products, visit our new ETFs category.
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