New ETF launches with breakfast strategy
The film 'Trading Places,' starring Dan Aykroyd and Eddie Murphy, helped inspire this fund
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We all know that breakfast can be the springboard for a successful day, and the recently launched Direxion Breakfast Commodities Strategy ETF is a first-of-its kind exchange-traded fund (ETF) offering exposure to the most important meal of the day.
BRKY tracks the S&P GSCI Dynamic Roll Breakfast (OJ 5% Capped) Index and includes corn, coffee, lean hogs (bacon), orange juice concentrate, sugar and wheat.
During this time of inflation, this basket of commodities may offer investors diversification, due to their non-correlated returns in comparison to stocks and bonds, the company said in a press release.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| BRKY | NO DATA AVAILABLE | - | - | - |
Why is an ETF in general a wise investment purchase?
David Mazza, managing director and head of product, Direxion said that ETFs offer a number of structural advantages to both buy and hold investors and more directional "traders."
"Their ease of trading and tax advantages is particularly helpful to help savvy traders weather market volatility–and even profit in adverse conditions," he said.
What makes this ETF different?
Mazza explained that each of these commodities has relatively inelastic demand qualities and faces tailwinds due to inflation, supply chain pressures and geopolitical tensions.
"In addition, the decline in tech and stocks in general are leaving investors especially hungry for commodities," Mazza said.
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Why was the breakfast model selected?
Mazza stated that the product’s idea came from two areas.
First and foremost, he said commodities have proven attractive to investors looking for a hedge against inflation and offer diversification to traditional stock and bond portfolios.
"Global food prices are at their highest ever levels," said Mazza. "Breakfast commodities are attractive because of the relatively steady demand of these American staples, but also because we felt that many investors were underexposed to them."
Secondly, Mazza said Direxion was inspired when the fictional characters Mortimer Duke and Randolph Duke explained commodities to Billy Ray Valentine in the 1983 film "Trading Places," starring Dan Aykroyd and Eddie Murphy.
"In all honesty, I love the movie ‘Trading Places,’ and BRKY was created to allow traders to directly access breakfast commodities like the characters in the classic movie," he quipped.
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How are ETFs are passive and how purchasing this ETF is lower risk
BRKY tracks the S&P GSCI Dynamic Roll Breakfast (OJ 5% Capped) Index. While commodities are inherently volatile, the index is designed to lessen the impact of near-term price volatility by employing a more flexible monthly futures rolling strategy using a systematic rule-based methodology to search for contract months further out that have the largest roll yield for each commodity, says Mazza.
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Why is diversification of your portfolio important in a bear market?
According to Mazza, if you take a walk through your local supermarket, you’ll get an indication of how important diversification is. As interest rates rise, he said the economy cools, and significant geopolitical uncertainty takes a toll on the average American’s spending power, causing the prices of everyday commodities to skyrocket.
"With prices increasing, investors may want to consider diversifying into these commodities to bolster their portfolios against losses in stocks and bonds," Mazza said.