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:

• $1.6 million in interest income
• $(0.1) million net realized trading loss
• $(3.5) million loss from the change in unrealized value of futures positions
• $0.2 million in operating expenses

The unrealized trading losses show that the value of the Fund’s open futures positions has declined, likely driven by the drop in aluminum and zinc futures. The realized trading loss was minor, indicating the Fund’s trading activity was not highly profitable. Interest income made up the majority of the Fund’s revenue.

Balance Sheet and Liquidity

The Fund meets asset margin requirements and pays expenses by holding U.S. Treasury Bills, money market mutual funds, and affiliated ETFs. The Fund held around $6 million in Treasury Bills during the quarter.

The Fund has no outstanding debt or liquidity issues. It is able to generate cash when needed by issuing new shares to authorized participants or as futures positions are closed. The Fund is not using any off-balance sheet financing structures.

Market and Credit Risk Discussion

The Fund has market risk tied to the volatility of commodity futures prices. There is an inherent uncertainty in the Fund’s futures trading strategy. A drastic market event could lead to substantial or total loss of investor capital.

Credit risk is mitigated by holding assets at large, reputable financial institutions. However, there is a remote risk that one of these institutions cannot meet obligations owed to the Fund.

Outlook and Trends

Industrial metals markets face uncertainty tied to geopolitics, supply shortfalls, China’s economy, and smelter production costs. However, demand is expected to rise over the long term as countries invest in infrastructure and renewable energy capabilities.

The Fund aims to maintain a portfolio weighting that matches historical world production levels across the metals it tracks. This provides broad commodity exposure. The Fund is likely to continue experiencing volatility in the near-term as industrial metals markets react to changes in macroeconomic trends.