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 rather than generate profits.
Fund Operations
The Fund operates by trading futures contracts on aluminum, copper, and zinc. The total value of the Fund’s futures positions is set to match the Fund’s net asset value rather than the benchmark index value.
The Fund holds U.S. Treasuries and cash to meet margin requirements on its futures positions. The remainder is held on deposit for cash management. Interest and dividends from these cash holdings make up the majority of the Fund’s income.
The Fund has minimal cash flow needs outside of trading futures contracts. Its expenses are the management fee paid to Invesco and commissions paid to its futures broker.
Future Outlook
The near-term outlook for industrial metals remains uncertain. Aluminum and zinc prices face ongoing headwinds while copper has shown resilience. However, unpredictable events like the Ukraine war or supply disruptions can cause large price swings.
Going forward, the Fund will continue trading futures contracts to track its benchmark index. However, position limits and market liquidity constraints could force temporary deviations. The Fund may also trade other correlated futures contracts if deemed practical.
In summary, the Invesco DB Base Metals Fund provides exposure to industrial metals futures with its market price closely tracking its benchmark index. The Fund posted moderate losses over the past quarter driven by declining aluminum and zinc futures.