BlackRock launches correlation-busting commodity ETF

CommoditiesBlackRock has launched a commodity ETF saying it will help investors combat increasing correlation between stocks and bonds.

The iShares Diversified Commodity Swap Ucits ETF delivers exposure to 20 different commodities including energy, agriculture, industrial metals, precious metals and livestock.

The launch comes at a time when the correlation between historically uncorrelated asset classes is rising, the firm said.

Fergus Slinger, co-head of iShares sales Europe Middle East and Africa, said: “Diversification is becoming more difficult to achieve due to increasing correlation between equities and bonds across global markets. This fund is a direct response to growing investor appetite for asset classes that offer stronger diversification impact in portfolios, and many are looking to commodities.”

The fund – which has a total expense ratio of 0.19% – uses derivatives to track the Bloomberg Commodity USD Total Return Index and caps each commodity sector at 33% and each single commodity at 15%, which Slinger said would prevent investors from becoming overexposed to a particular part of the market.

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