UBS ETF CMCI Ex-Agriculture SF UCITS ETF

Issuer: UBS

Asset Class: Commodity

TER: 34bps

Trading Currency: GBX

Pays Income: False

Listing Date: 10 May 2016

Ticker: CXAP

ISIN: IE00BZ2GV965

This fund provides exposure to a broad basket of commodities, deliberately excluding the agricultural sector. It aims to replicate the performance of an index composed of futures contracts across various commodity sectors like energy, industrial metals, and precious metals. By excluding agriculture, the strategy avoids the unique volatility drivers associated with that sector, such as weather patterns, crop diseases, and agricultural policies, which may appeal to investors seeking a more focused play on industrial and energy-related economic activity. The synthetic replication method means the fund uses derivatives, typically swaps, to achieve its investment objective rather than holding the underlying physical commodities or futures contracts directly.

Investing in broad commodities can serve as a powerful diversification tool, as commodity prices often exhibit low correlation to traditional asset classes like stocks and bonds. This can help cushion a portfolio during periods of equity market downturns. Furthermore, commodities are widely considered a hedge against inflation. When the general price level of goods and services rises, the prices of raw materials tend to increase as well, potentially preserving the purchasing power of an investment. This particular strategy, with its focus on non-agricultural commodities, offers a way to tap into global economic growth trends, as demand for energy and metals is closely linked to industrial production and infrastructure development.

This type of investment is suitable for those looking to diversify their holdings and add a component that can perform well in an inflationary environment. However, potential investors should be aware of the inherent risks. Commodity markets are known for their high volatility, driven by geopolitical events, supply and demand imbalances, and shifts in global economic sentiment. As the fund utilizes futures contracts, it is also exposed to risks related to the shape of the futures curve, such as contango, which can erode returns over time. The use of swaps introduces counterparty risk, which is the risk that the other party in the swap agreement could default on its obligations.