Invesco launches ETF targeted on metals required for electrical autos, power transition
Heavy trucks seen working at a nickel mining area in Soroako, South Sulawesi, Indonesia.
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Amid a boom in interest for electric vehicles, Invesco is betting that the metals required for EVs and the energy transition broadly will be a hot new area for investors.
The Invesco Electric Vehicle Metals Commodity Strategy No K-1 ETF, which focuses exclusively on the metals required for EVs, began trading Wednesday. The fund trades under the ticker EVMT, and it holds futures contracts tied to aluminum, copper, nickel, cobalt, zinc and iron ore. The portfolio will generally be concentrated in the front-month contract for each commodity.
Lithium, which is the key metal across EV batteries, is notably missing.
Jason Bloom, head of fixed income and alternatives ETF product strategy at Invesco, said lithium futures trading does not currently meet the firm’s minimum liquidity threshold for ETFs.
Metals prices have surged this year after Russia’s invasion of Ukraine prompted fears of shortage, but Bloom believes more gains are ahead.
“Growth in demand for metals is part of the growth in EVs, and was beginning to catch up and in some cases outstrip supply,” prior to Russia’s invasion, he said. “The war in Ukraine simply highlighted the upside risk in these commodities.”
“We feel like there’s a fair amount of durability to the current fundamentals in the market,” he added.
The Wall Street Journal first reported the fund’s launch.
New mines take years to bring online, and can face permitting hurdles. Additionally, the resource-intensive nature of mining means new projects often face opposition based on concerns around impacts to local communities. Forecasts call for more materials that will be needed to move the world away from fossil fuel dependence, which has prompted some to forecast prolonged shortages.
There are already a number of EV-focused funds on the market, but these tend to highlight car companies, battery makers and mining names. Invesco’s new fund is the first to focus exclusively on metals needed by EV manufacturers, according to a statement from the firm.
Bloom said this fund has been in the works for over a year. It was born in part from clients approaching the firm and asking for a metals basket targeting EV growth. Bloom said that Invesco’s involvement in the broader commodity market made this new product a natural next step, and Invesco will utilize its expertise with derivatives to optimize rolling contracts.
“We’re very excited about the prospects for these markets… buckle your seatbelt — you can’t guarantee returns [for commodities]but we’re pretty comfortable forecasting volatility,” Bloom said, before adding that he thinks now is an attractive entry point.
The actively managed fund will be rebalanced on a biannual basis. Invesco seeded the new fund with roughly $28 million dollars. The fund carries an expense ratio of 0.59%.