Invesco Expands Commodity ETF Suite with a Unique Electric Vehicle Commodities Strategy
New commodities solution brings investors access to the metals essential for electric vehicles in a first-of-its-kind ETF
ATLANTA, April 27, 2022 /PRNewswire/ -- Invesco Ltd. (NYSE: IVZ), a leading global asset management firm, announced today that it has expanded its Invesco Commodities Exchange-Traded Fund (ETF) Suite with the launch of Invesco Electric Vehicle Metals Commodity Strategy No K-1 ETF (EVMT). EVMT is an actively managed ETF designed to provide economic exposure to the commodities widely used in the production of electric vehicles.
"Invesco Electric Vehicle Metals Commodity Strategy No K-1 ETF will be the first non-equity ETF to invest in the electronification of transport, furthering Invesco's history of pioneering value-added investment strategies that have exciting potential for client portfolios," says Anna Paglia, Global Head of ETFs and Indexed Strategies at Invesco.
The Invesco EVMT ETF is the first fund to offer access to upstream electric vehicle transition themes by offering exposure to commodities critical to producing electric vehicles. This allows investors the ability to focus solely on industrial metals, rather than a midstream investment in companies that manufacture batteries and electric vehicles.
At launch, EVMT will invest in derivatives and other financially linked instruments to gain exposure to metals critical to electric vehicle production. These metals currently include aluminium, cobalt, copper, iron ore, nickel, and zinc. The ETF is actively managed with the potential to expand both the number and type of metals included in the ETF as electric vehicle production and technology evolves.
"EVMT will be the first commodities fund to offer exposure to an electric vehicle theme, as well as the only ETF that considers metals necessary for whole car production, rather than a focus on battery production," says Jason Bloom, Head of Fixed Income and Alternatives ETF Strategy at Invesco. "By considering the whole car production through a commodities lens, the composition of EVMT focuses on the full opportunity, which affects the weightings of the included metals."
The interest in electric vehicles continues to build in the U.S., bolstered by President Biden's executive order which set a goal for electric vehicles to make up half the cars and trucks sold in the U.S. by 2030.1 Major automobile manufacturers such as Ford, GM, Volvo, Honda2 and others have also committed to electric vehicle transition by 2040.3 The acceleration of electric vehicle production and the materials needed to ramp-up this technology will be critical factors in decarbonization and the push to increase renewable energy.
Invesco's Commodities ETF line-up has seen over $3.8 billion of inflows in 20224 thus far, due to the increased investor interest in commodities, possibly due to economic issues including rising interest rates, U.S. inflation and geopolitical unrest. Invesco's broad commodity ETF, Invesco Optimum Yield Diversified Commodity Strategy No K-1 ETF (PDBC), is the largest broad commodity ETF globally.5
EVMT will seek long-term capital appreciation by utilizing a strategy designed to exceed the performance of its benchmark, the S&P GSCI Electric Vehicle Metals Index. In pursuing this strategy, EVMT will generally align holdings in a weighting consistent with the benchmark, although it may not seek exposure to all the components of the benchmark or in the same proportion. Similar to PDBC, EVMT is structured as a 1940 Act Fund6 that avoids generating a Schedule K-1 for investors and instead issues a Form 1099. This tax structure is preferential for some investors.
EVMT further strengthens the Invesco Commodities line-up, adding a thematic solution to an increasingly relevant area of alternatives ETFs.
1 The White House, President Biden Announces Steps to Drive American Leadership Forward on Clean Cars and Trucks, August 5, 2021
2 The ETF does not have any exposure to these companies.
3"Section 3.4, Automaker commitments to EVs", Electric Vehicle Outlook 2021, Bloomberg NEF, June 9, 2021
4 Based on Bloomberg Assets Under Management across 9 products on March 31, 2022.
5 Based Bloomberg Assets Under Management of the commodities ETF sector on March 31, 2022
6 A 1940 Act fund is a pooled investment vehicle offered by a registered investment company as defined in the 1940 Investment Companies Act (commonly referred to in the United States as the '40 Act or, in some instances, the Investment Company Act (ICA).
About Invesco Ltd.
Invesco Ltd. (TickerNYSE: IVZ) is a global independent investment management firm dedicated to delivering an investment experience that helps people get more out of life. Our distinctive investment teams deliver a comprehensive range of active, passive and alternative investment capabilities. With offices in more than 20 countries, Invesco managed US $1.6 trillion in assets on behalf of clients worldwide as of March 31, 2022. For more information, visit www.invesco.com/corporate.
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The Fund's return may not match the return of the Index. The Fund is subject to certain other risks. Please see the current prospectus for more information regarding the risk associated with an investment in the Fund.
Investments linked to prices of commodities may be considered speculative. Significant exposure to commodities may subject the Fund to greater volatility than traditional investments. The value of such instruments may be volatile and fluctuate widely based on a variety of factors. Prices fluctuations may be quick and significant and may not correlate to price movements in other asset classes.
Derivatives may be more volatile and less liquid than traditional investments and are subject to market, interest rate, credit, leverage, counterparty and management risks. An investment in a derivative could lose more than the cash amount invested.
Risks of futures contracts include: an imperfect correlation between the value of the futures contract and the underlying commodity; possible lack of a liquid secondary market; inability to close a futures contract when desired; losses due to unanticipated market movements; obligation for the Fund to make daily cash payments to maintain its required margin; failure to close a position may result in the Fund receiving an illiquid commodity; and unfavorable execution prices.
In pursuing its investment strategy, particularly when "rolling" futures contracts, the Fund may engage in frequent trading of its portfolio securities, resulting in a high portfolio turnover rate.
Investments focused in a particular sector, such as metals, are subject to greater risk, and are more greatly impacted by market volatility, than more diversified investments. Investments in metals may be highly volatile and can change quickly and unpredictably due to several factors, including the supply and demand of each metal, environmental or labor costs, political, legal, financial, accounting and tax matters and other events the Fund cannot control. As a result, the price of a metal could decline, adversely affecting the Fund's performance.
Thematic investing involves the risk that the electric vehicle theme is out of favor, or that the metals chosen to capitalize on that theme underperform the market. The Fund invests in instruments linked to the metals used in the production of electric vehicles, and performance may suffer if the metals do not benefit from the development of the electric vehicle theme. While the Fund will not invest directly in electric vehicle and other related companies, the performance of its commodity-based strategy may be indirectly impacted by the performance of such companies.
Swaps involve greater risks than direct investments. Swaps are subject to leveraging, liquidity and counterparty risks, and therefore may be difficult to value. Adverse changes in the value or level of the swap can result in gains or losses that are substantially greater than invested, with the potential for unlimited loss.
Commodity-linked notes may involve substantial risks, including risk of loss of a significant portion of principal and risks resulting from lack of a secondary trading market, temporary price distortions, and counterparty risk.
The Fund's investments in futures contracts will cause it to be deemed to be a commodity pool, subjecting it to regulation under the Commodity Exchange Act and Commodity Futures Trading Commission (CFTC) rules. The Adviser, a registered Commodity Pool Operator (CPO) and commodity trader advisor (CTA), and the Fund will be operated in accordance with CFTC rules. Registration as a CPO or CTA subjects the Adviser to additional laws, regulations, and enforcement policies; all of which could increase compliance costs, affect the operations and financial performance. Registration as a commodity pool may have negative effects on the ability of the Fund to engage in its planned investment program.
A decision as to whether, when and how to use options involves the exercise of skill and judgment and even a well-conceived option transaction may be unsuccessful because of market behavior or unexpected events. The prices of options can be highly volatile, and the use of options can lower total returns. Exchange-traded notes (ETNs) are subject to credit risk of the issuer, and the value of the ETN may drop due to a downgrade in the issuer's credit rating, despite the underlying market benchmark or strategy remaining unchanged.
Counterparty risk is the risk that the other party to the contract will not fulfill its contractual obligations, which may cause losses or additional costs.
Leverage created from borrowing or certain types of transactions or instruments may impair liquidity, cause positions to be liquidated at an unfavorable time, lose more than the amount invested, or increase volatility.
To qualify as a regulated investment company ("RIC"), the Fund must meet a qualifying income test each taxable year. Failure to comply with the test would have significant negative tax consequences for shareholders. The Fund believes that income from futures should be treated as qualifying income for purposes of this test, thus qualifying the Fund as a RIC. If the IRS were to determine that the Fund's income is derived from the futures did not constitute qualifying income, the Fund likely would be required to reduce its exposure to such investments in order to maintain its RIC status. The Fund may hold illiquid securities that it may be unable to sell at the preferred time or price and could lose its entire investment in such securities.
The Fund currently intends to effect creations and redemptions principally for cash, rather than principally in-kind because of the nature of the Fund's investments. As such, investments in the Fund may be less tax efficient than investments in ETFs that create and redeem in-kind.
Because the Subsidiary is not registered under the Investment Company Act of 1940, as amended (1940 Act), the Fund, as the sole investor in the Subsidiary, will not have the protections offered to investors in U.S. registered investment companies.
The Fund is subject to management risk because it is an actively managed portfolio. The investment techniques and risk analysis used by the portfolio managers may not produce the desired results.
The Fund may hold illiquid securities that it may be unable to sell at the preferred time or price and could lose its entire investment in such securities.
Investments focused in a particular sector, such as metals, are subject to greater risk, and are more greatly impacted by market volatility, than more diversified investments. The Fund is non-diversified and may experience greater volatility than a more diversified investment.
Shares are not individually redeemable and owners of the Shares may acquire those Shares from the Fund and tender those Shares for redemption to the Fund in Creation Unit aggregations only, typically consisting of 10,000, 20,000, 25,000, 50,000, 75,000, 80,000, 100,000, 150,000 or 200,000 Shares.
The S&P GSCI Electric Vehicle Metals Index seeks to measure the performance of the tradeable metals used in the production of an electric vehicle (EV) and is designed to have the flexibility to respond to changes in EV technology and the adoption of new metals futures contracts. An investment cannot be made directly into an index.
This does not constitute a recommendation of any investment strategy or product for a particular investor. Investors should consult a financial professional before making any investment decisions.
Invesco Distributors, Inc. is the US distributor for Invesco's retail products and private placements, and is an indirect, wholly owned subsidiary of Invesco Ltd.
Before investing, investors should carefully read the prospectus/summary prospectus and carefully consider the investment objectives, risks, charges and expenses. For this and more complete information about the Fund call 800 983 0903 or visit invesco.com for the prospectus/summary prospectus.
Contact: Stephanie Diiorio, stephanie.diiorio@invesco.com, 212.278.9037
SOURCE Invesco Ltd.
