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Direxion has launched an agricultural commodities ETF providing thematic exposure to ingredients commonly found in the most important meal of the day.
The Direxion Breakfast Commodities Strategy ETF (BRKY US) has been listed on NYSE Arca with an expense ratio of 0.70%.
The ETF stands to benefit from rising agricultural commodity prices caused by supply chain pressures, geopolitical tensions, weather-related issues, and an increasing number of countries restricting food exports.
According to the United Nations’ Food and Agriculture Organization, food prices have increased by roughly 30% year-over-year, hitting their highest levels ever recorded in April 2022, highlighting the extreme nature of current challenges.
Commenting on the ETF’s launch, David Mazza, Managing Director and Head of Product at Direxion, said: “2022 has been one of the most challenging environments for traditional portfolios in decades. Investors can no longer rely on only stocks and bonds to meet their financial goals. Breakfast commodities can play an important role in providing diversification as well as a hedge against the inflation we are all feeling in our wallets.”
The fund is linked to the S&P GSCI Dynamic Roll Breakfast (OJ 5% Capped) Index which includes a basket of six commodities – coffee, corn, lean hogs (bacon), orange juice concentrate, sugar, and wheat.
Commodities in the index are production-weighted while capping exposure to orange juice concentrate at 5%. Corn and wheat currently account for the two largest positions with weights of approximately 40% and 30%, respectively, followed by lean hogs and sugar at roughly 10% each.
The index utilizes a flexible monthly futures rolling strategy designed to alleviate the negative impact of rolling in contango commodity markets.
As of the end of May, the index is up 26.3% year-to-date.