Invesco has launched an exchange-traded fund (ETF) focused on metals needed for electric vehicles and the energy revolution

Invesco believes that the surge in enthusiasm for electric vehicles will create a new trading possibility in the metals needed for EVs, as well as the broader energy shift.

The Invesco Electric Vehicle Metals Commodity Strategy No K-1 ETF began trading on Wednesday, focusing solely on such metals. The fund, which trades under the symbol EVMT, invests in cobalt, zinc, aluminum, copper, nickel, and iron ore futures contracts. For each commodity, the portfolio will be heavily weighted toward the front-month contract. The main metal in EV batteries, lithium, is conspicuously absent.

Lithium futures trading does not now match Invesco’s minimal liquidity level for exchange-traded funds, according to Jason Bloom, who is the fixed income & alternatives ETF product strategy head. Metals prices have risen this year as a result of Russia’s invasion of Ukraine, raising fears of scarcity, but Bloom expects, even more, to rise in the future.

Prior to Russia’s invasion, he added, “demand for metals was starting to catch up and, in some circumstances, outpace supply.  The Ukraine conflict has only served to accentuate the upside danger in these commodities.”

“We believe the existing fundamentals in the market have a decent level of endurance,” he added. The creation of the fund was initially announced by the Wall Street Journal.

New mines might take years to come online and face significant permitting challenges. Furthermore, because of the resource-intensive aspect of mining, new projects frequently face opposition from local people. More metals are expected to be required to move away from fossil fuel dependence, prompting some experts to predict chronic shortages.

There are now a variety of EV-focused funds available, with a concentration on automakers, battery manufacturers, and mining companies. According to Invesco, the new fund was the first one to focus solely on metals required by electric vehicle producers.

The fund, which Bloom claims have been in the pipeline for more than a year, was inspired in part by client requests for a metals basket that focuses on EV growth. The new product was a natural next step for Invesco because of its engagement in the broader commodity market, according to Bloom. Rolling contracts will be optimized using the company’s derivatives expertise.

“We’re extremely optimistic about the potential for these markets… tighten your seatbelt – you can’t promise returns [in commodities], but we’re quite comfortable anticipating volatility,” Bloom added, noting that now is a good time to get in.

Every two years, the actively managed fund is going to be rebalanced. Invesco put $28 million into the new fund as a seed. The cost ratio of the fund is 0.59 percent.

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