On Wednesday, Invesco, the publicly listed global investment mega-manager with $1.6 trillion in client assets under its stewardship, announced a new addition to its suite of commodity-indexed exchange traded funds (ETFs). The new Invesco Electric Vehicle Metals Commodity Strategy No K-1 ETF (EVMT) is an actively managed ETF designed to provide economic exposure to 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,” Invesco’s Global Head of ETFs and Indexed Strategies, Anna Paglia said in an official statement marking the fund launch.
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 aluminum, 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,” Invesco’s Head of Fixed Income and Alternatives ETF Strategy, Jason Bloom said. “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.”
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. Major automobile manufacturers such as Ford, GM, Volvo, Honda and others have also committed to electric vehicle transition by 2040. 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.
The Invesco’s Commodities ETF line-up has seen over $3.8 billion of inflows in 2022 to date, a trend the firm attributes to 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.
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 Fund that avoids generating a Schedule K-1 for investors and instead triggers a Form 1099: a tax structure that is preferential for some investors.
In other alternative ETF news, on Wednesday, global asset manager KraneShares, widely known for its extensive suite of ETFs, announced the launch of the KraneShares Global Carbon Offset Strategy ETF (KSET) on the NYSE.
KSET offers broad coverage of the voluntary carbon market by tracking carbon offset futures contracts. These futures contracts include nature-based global emission offsets (N-GEOs) and global emission offsets (GEOs), which trade through the CME Group, the world’s largest financial derivatives exchange. KSET will dynamically add additional offset markets as they reach scale.
