Exchange Traded Commodities (ETCs)
ETFs investing in or tracking a commodity are often referred to as Exchange Traded Commodities or ETCs. They can either be backed by a physical commodity or by commodity futures.
In the past, investors have had to purchase shares in commodity companies such as Rio Tinto in order to gain exposure to commodities. Whilst this does provide exposure, it is an indirect exposure which means that the commodity company share price can still fall even if the commodity in question actually rises in value. ETCs now provide investors with direct access and exposure to these commodities and with that the ability to further diversify their portfolio.
There are a number of single commodity ETCs but ETC Index Securities are also available, made up of a number of commodities. For example an Agriculture ETC might have exposure to several commodities such as wheat, corn, soybeans and sugar.
ETCs that are backed by commodity futures carry an added counterparty risk. Please see the counterparty risk section under the Risks of ETFs heading for further details.
Exchange Traded Funds
Have a question?
- Email us
- Call us on 0117 900 9000
(Mon - Fri, 8:30am - 6pm)