Invesco, an independent investment management firm, recently launched its EV Metals ETF earlier last week. This comes as forecasts call for more metals required for the transition to renewable energy use in an effort to decrease dependence on fossil fuels.
The exchange-traded fund, which is officially referred to as the Invesco Electric Vehicle Metals Commodity Strategy No. K-1 ETF, is trading under the EVMT ticker. It holds futures contracts tied to iron ore, aluminum, zinc, copper, cobalt and nickel. The company is betting that the increasing interest in electric cars will create a new trading opportunity in the metals needed in the manufacture of electric cars. The fund’s portfolio will be concentrated in the front-month contract for every commodity.
However, lithium, which is a crucial component in electric car batteries, hasn’t been included in the ETF. Jason Bloom, head of Invesco Alternatives ETF product strategy and fixed income, stated that trading in lithium futures didn’t meet the company’s minimum liquidity threshold for ETFs.
The prices of various metals have increased significantly since Ukraine’s invasion by Russia caused shortage concerns. Bloom expects further gains in the long run, explaining that the increase in demand for metals was part of the growth in electric cars and, even before Russia’s invasion, it had already began to catch up and surpass supply in some cases. He noted that the raging war in Eastern Europe just highlighted the “advantageous risk” in these commodities.
There already exist a number of electric car-focused funds, which mainly involve battery manufacturers, auto manufacturers and mining companies. This recently established exchange-traded fund by Invesco is the first fund to exclusively focus on the metals required by electric car manufacturers.
This actively managed fund, which had been in the works for some time, was born from investors approaching the company and asking that a metals basket that targeted electric car growth be created. Bloom noted that the firm’s involvement in the broader commodity market made the launch of a new product the next step. The firm plans to utilize its derivatives expertise in optimizing rolling contracts.
In addition, Bloom stated that the company was enthusiastic about the prospects for the markets, adding that while he couldn’t guarantee returns for commodities, he was comfortable predicting volatility.
Invesco seeded its new fund with about $28 million. This EV metals fund carried an expense ratio of almost 0.6%. It will be rebalanced twice a year. It remains to be seen how closely this ETF will reflect the realities that EV companies such as Workhorse Group Inc. (NASDAQ: WKHS) encounter as they source the different needed metals for making electric vehicles.
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