Elkhorn Investments has launched the Elkhorn Fundamental Commodity Strategy exchange-traded fund (ETF), which it describes as the first ETF based on Research Affiliates’ fundamental research.
“Commodities are a forgotten asset class in today’s market,” says Ben Fulton, founder and CEO of Elkhorn. “As a result, product innovation has lagged that of other asset classes for the better part of a decade. Together with Research Affiliates, we are excited to create a better way for investors to access the broader commodity market in an ETF without a K-1 tax form.”
The Elkhorn Fundamental Commodity Strategy ETF is an actively-managed ETF that seeks to provide investment returns that are highly correlated to the Dow Jones RAFI Commodity Index by investing in exchange-traded commodity futures contracts and other commodity-linked instruments, the firm explains. The Dow Jones RAFI Commodity Index offers an alternative beta strategy that uses price momentum and roll yield to outperform the broad market. The ETF is designed to be a fundamental factor-weighted, broad-market commodity strategy with a modified dynamic roll.
The fund’s assets will also be invested in a short duration portfolio of highly-liquid, high-quality bonds to collateralize exposure and target a total return which exceeds that of the Dow Jones RAFI Commodity Index, according to Elkhorn Investments.
Rob Arnott, chairman and Chief Executive Officer of Research Affiliates says, “Much is made of smart beta strategies within equities and increasingly bonds. 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.”
The Elkhorn Fundamental Commodity Strategy ETF is one of two actively-managed, commodity-based ETFs that the company recently launched. The second is the Elkhorn Commodity Rotation Strategy ETF. The firm’s ETF lineup also includes the Elkhorn S&P High Quality Preferred ETF.More information about the Elkhorn Fundamental Commodity Strategy ETF can be found online here.