In the first quarter of 2024, Invesco DB Base Metals Fund reported a net asset value of $6.6 million and discussed financial condition and results of operations in their management’s discussion. They also addressed market risk, controls and procedures, legal proceedings, risk factors, unregistered sales of equity securities, defaults on senior securities, mine safety disclosures, and other information.
Company Overview
Invesco DB Base Metals Fund is a commodity pool that trades futures contracts in aluminum, copper, and zinc with the goal of tracking the DBIQ Optimum Yield Industrial Metals Index. The Fund was formed in 2006 and is managed by Invesco Capital Management LLC.
The Fund has returned -1.86% over the past three months based on its net asset value (NAV). This was driven by falling aluminum and zinc futures prices, partially offset by rising copper futures. The Fund’s market price per share has decreased from $18.31 to $17.95 over the quarter.
Revenue and Profit Analysis
The Fund had a net loss of $2.2 million over the past three months. This loss was caused by:
The unrealized trading losses show that the Fund’s open futures positions have declined in value over the quarter. However, the Fund aims to track its benchmark index over time, not outperform.
Fund Operations
The Fund operates by trading futures contracts on aluminum, copper, and zinc. The total value of the futures contracts is intended to match the Fund’s net asset value.
The Fund holds U.S. Treasuries and cash to meet margin requirements and for cash management. The interest and dividends from these holdings help to offset the Fund’s expenses.
The Fund has limited liquidity risks due to the ability of authorized participants to create or redeem shares daily. However, its futures positions may face periods of low liquidity depending on market conditions.
The Fund has financial obligations to the Managing Owner (management fee) and Commodity Broker (commission) based on its net assets and futures trading volume.
Cash Flows
The Fund’s main cash inflow is the issuance of shares to authorized participants, raised to invest in Treasuries, cash equivalents, and to meet futures margin requirements.
Its main cash outflow is the redemption of shares by authorized participants. During the quarter, shares purchased were $3.5 million while shares redeemed were $4.4 million.
Outlook
The Fund aims to closely track its benchmark index, not outperform. Performance is primarily driven by the prices of its aluminum, copper and zinc futures positions.
Industrial metal commodity prices have faced significant volatility recently due to factors like supply shortfalls, energy prices, economic conditions, and geopolitics. The Fund may continue to experience periods of elevated volatility in its returns related to these factors.