Introduction
The Market Access Rogers International Commodity Index UCITS ETF (RICI) is one of Europe’s longest-established and broadest commodity ETFs. It was launched in 2006 and is listed in Frankfurt, Zurich and on the London Stock Exchange.
The ETF tracks the Rogers International Commodity Index® (RICIGLTR), a US dollar-denominated total return index of commodities consumed in the global economy, ranging from agricultural to energy to metal products. The Index provides exposure to 38 different exchange-traded commodities, through futures contracts quoted in four currencies, listed on 10 exchanges in four countries.
RICIGLTR is calculated on a total return basis, meaning that it includes an assumed interest rate return based on the USD 3-month T-bill rate.
Reasons to consider the RICI and broad commodity exposure
- RICI has the broadest range of constituents among major commodity benchmarks
- A broad index provides a potential hedge against rising inflation risks
- Themes: base metals are key to the clean energy transition
- Themes: climate change impacts agriculture and energy demand
- Oil and gold provide a potential hedge against geopolitical risks
Performance
Source: Market Access, Bloomberg. Past performance should not be used as an indicator of future performance.
Discrete annual performance to 28 June 2024 (in GBP)
| Jun 19 - Jun 20 | Jun 20 - Jun 21 | Jun 21 - Jun 22 | Jun 22 - Jun 23 | Jun 23 - Jun 24 | |
|---|---|---|---|---|---|
| Jim Rogers International Commodity Index (GBP) | -21.08% | 42.70% | 53.71% | -13.30% | 10.86% |
| Spot Gold (GBP) | 29.38% | -10.90% | 15.97% | 1.82% | 21.78% |
| FTSE 100 Index | -16.91% | 14.06% | 1.87% | 5.05% | 8.40% |
| FTSE NAREIT All Equity REITS TR Index (GBP) | -4.23% | 19.04% | 6.90% | -8.33% | 6.26% |
| 5 Yr Gilt Index | 0.35% | 0.10% | 1.00% | 3.38% | 4.26% |
Source: Market Access, Bloomberg. Past performance should not be used as an indicator of future performance.
Five year returns to 28 June 2024 (in GBP)
| 5 Year | RICIGLTR (GBP) | GBP Gold Spot (XAU) | FTSE 100 Index |
|---|---|---|---|
| Performance | 66.37% | 65.76% | 9.95% |
| Annualised performance | 10.72% | 10.64% | 1.91% |
| Annualised Volatility | 19.33% | 14.74% | 17.48% |
| Max Drawdown | 38.97% | 22.43% | 35.03% |
| Sharpe Ratio | 0.45 | 0.59 | 0.00 |
Source: Market Access, Bloomberg. Past performance should not be used as an indicator of future performance.
Commodities as an inflation hedge
Commodities, as key inputs in manufacturing and consumer staples, can be leading indicators of emerging inflation and exposure to them can serve to potentially hedge inflation risks.
Source: Market Access, Bloomberg. Past performance should not be used as an indicator of future performance.
COMMODITY INDEX CONSTITUENTS RICI vs BLOOMBERG, UBS CMCI, S&P GSCI
| RICI | BCOM | UBS CMCI | S&P GSCI |
|---|
Source: Target 2024 weights. Market Access, index issuer websites: RICI, Bloomberg Commodity Index, UBS CMCI, S&P GSCI. RICI - Rogers International Commodity Index (RICIGLTR), BCOM – Bloomberg Commodity index (BCOMTR), UBS CMCI Constant Maturity Commodity Index (CMCITR), S&P GSCI - S&P GSCI Index (SPGCGPTR).
RICI index background
James B. Rogers, Jr. designed the index in the late 1990s. His focus was to create an index that reflected global consumption of commodities.
This global focus differentiates the RICI from other commodity indices, meaning that it includes commodities like rice, rubber, white sugar and lumber.
There are 11 commodities in the RICI that are not included in the other three comparison benchmarks. They represent 9.05% of the index target weights.
Base metals – essential to the transition to clean energy
In the drive towards a net zero carbon economy, there will be a potentially significant uplift in demand for commodities that are critical in enabling the transition to clean energy. This includes nickel, which is one of the key materials used in batteries for electric vehicles.
Stated Policies Scenario, an indication of where the global energy system is heading based on a sector-by-sector analysis of today’s policies and policy announcements.
Sustainable Development Scenario, indicating what would be required in a trajectory consistent with meeting the Paris Agreement goals.
Source: International Energy Agency, The Role of Critical Minerals in Clean Energy Transitions, NTree International
Commodity in focus – Gold
Source: Data as of 28 June 2024. Market Access, Bloomberg.
Commodity in focus – Gold
Gold has been one of the top performing assets over the first seven months of 2024. We look at some the factors that will influence the gold price over the second half of the year. These include the outlook for interest rates, particularly in the US, the US presidential election and other geopolitical events, changes in tax policies in India, and central bank buying. There is broad consensus that interest rates have peaked in major global economies. While optimism earlier in the year about the number of rate cuts in 2024 was dashed by relatively strong growth and inflationary pressures, there are increasing signs that these are abating. Economists at ING Bank are now confident that the US Fed will cut rates at its September meeting, with the evidence mounting of employment costs moderating, business surveys cooling and jobs reports indicating growing slack in the labour market.[1]
Lower interest rates point to a lower US dollar, which on balance should prove a positive for the gold price. In the US, where focus is increasingly turning to the presidential election in November, there is now greater uncertainty about the possible outcome following the withdrawal of President Biden from the race. Uncertainty and risk increase investor appetite for holding gold. The prospect of a Trump presidency, which would be likely to feature increased tariffs and scope for trade wars, efforts to weaken the US dollar as well as an increasing deficit, would on balance be supportive of gold as a hard asset.
In India, the customs duty on gold was reduced by more than 50%, from 15% to 6%, with effect from 24 July. This reduction could lead to an increase in demand both during the upcoming buying season (between August and December) and over the longer term. The World Gold Council’s econometric model suggests that Indian consumer demand, that is jewellery and bar and coin demand, could see an additional 50 tonnes or more in the second half of 2024.[[2]
Another factor that could increase gold demand in India is the revised definition of “Specified Mutual Funds” that excludes gold ETFs from debt and money market. This will result in a change to a more favourable tax treatment, for which eligibility is being shortened from 36 months to 12 months. While the impact of these changes will not be immediate as they are due to take effect from 1 April 2026, it will make investing in gold ETFs more attractive and so should lead to an uptick in demand.[3]
Lastly, the role of central banks will be an important element to observe. The World Gold Council estimates that central banks contributed 5% to the move in the gold price in the first half of the year. [4] However, the People’s Bank of China did not buy any gold in May or June, potentially because it was looking to support China’s currency. Despite its pause, the World Gold Council expects central bank buying to remain above trend. This is backed up by its recent central bank survey showing that 29% of gold reserves managers expect to increase gold exposure in the next 12 months, a figure that has grown each year since 2019, and 68% believe their exposure will remain unchanged.[5]
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[1]ING Think, FOMC preview: Growing confidence of a Fed rate cut in September, 26 July 2024
https://think.ing.com/articles/fomc-preview-growing-confidence-in-a-september-fed-rate-cut/ -
[2]World Gold Council, Indian gold import duties reduced to the lowest level in over a decade, 26 July 2024
https://www.gold.org/goldhub/gold-focus/2024/07/indian-gold-import-duties-reduced-lowest-level-over-decade?%3A_Your_Weekly_Gold_Market_Round-up%2C_July_26%2C_2024= - [3] See 2 above.
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[4] World Gold Council, Global Mid-Year Outlook 2024: Market in search of a catalyst, 2 July 2024
https://www.gold.org/goldhub/research/gold-mid-year-outlook-2024 -
[5]World Gold Council, 2024 Central Bank Gold Reserves Survey, 18 June 2024
https://www.gold.org/goldhub/data/2024-central-bank-gold-reserves-survey
How to invest
Please contact your wealth management adviser or stockbroker. The ETF is also available through leading online investment platforms. The ETF is ISA and SIPP eligible.
Please contact us if there any issues with trading the ETF through a platform and we will gladly try to assist.
To find out more, please click here for fund information and literature.
Please read the prospectus, including the risk factors, and KIID before making an investment in the ETF.
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key features
| Legal form | UCITS ETF |
| ISIN | LU0249326488 |
| TER / OCF | 0.60% |
| Domicile | Luxembourg |
| Management Company | FundRock Management Company S.A. |
| Investment Manager | China Post Global (UK) Limited |
| Custodian and Administrator | RBC Investor Services Bank S.A. |
| Replication | Synthetic (swap with Barclays Bank Plc) |
| ISA / SIPP eligible | Yes |
| UK Reporting Fund Status | Yes |