Invesco DB Commodity Index Tracking Fund Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Quarter Ended March 31, 2024

Press release · 05/09 01:07
Invesco DB Commodity Index Tracking Fund Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Quarter Ended March 31, 2024

Invesco DB Commodity Index Tracking Fund Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Quarter Ended March 31, 2024

In the first quarter of 2024, Invesco DB Commodity Index Tracking Fund reported a net asset value of $74.7 million. The fund’s financial statements show an increase in revenue and a decrease in expenses, leading to a higher net income. The management discussed the market conditions and the fund’s performance in detail. The fund also disclosed information about its market risk, controls and procedures, legal proceedings, risk factors, unregistered sales of equity securities, defaults on senior securities, and other information.

Overview

The Invesco DB Commodity Index Tracking Fund aims to track the DBIQ Optimum Yield Diversified Commodity Index Excess Return (the Index). The Index is intended to reflect changes in the market value of 14 commodities that make up the index.

The Fund invests in futures contracts on those 14 commodities to track the performance of the Index. The value of the Fund’s shares is expected to fluctuate based on changes in the value of those futures contracts.

Key Financial Metrics

Metric Q1 2024 Q1 2023
Net Asset Value Per Share Increased 4.22% Decreased 3.61%
Index Level Increased 3.13% Decreased 4.50%
Underlying Commodity Index Level Increased 4.52% Decreased 3.38%

Performance Details

Commodity Performance

The overall commodity complex performed positively in Q1 2024, supported by an improving economic backdrop and rising geopolitical tensions.

Energy commodities were the top contributors, with gains in crude oil, diesel, and gasoline futures. Natural gas was weaker due to high inventories and reduced seasonal heating demand.

Precious metals performed strongly as well, particularly gold, helped by expectations of easing interest rates and increased demand for safe haven assets.

Industrial metals staged a modest comeback late in the quarter as low prices led to supply curtailments.

Grain prices remained under pressure due to ample global supplies.

Fund Performance Drivers

Q1 2024

Rising futures prices for 8 out of 14 commodities contributed to Index gains. Brent crude oil, copper, gold, WTI crude oil, gasoline, silver, sugar and diesel posted gains.

Falling prices for aluminum, corn, natural gas, soybeans, wheat and zinc detracted somewhat from performance.

An increase in Treasury income and money market income compared to expenses also contributed to Fund returns.

Q1 2023

Falling futures prices for 8 out of 14 commodities drove Index losses. Declines in Brent crude oil, corn, WTI crude oil, natural gas, gasoline, soybeans, diesel and wheat outweighed gains in aluminum, copper, gold, silver, sugar and zinc.

A decrease in Treasury income and money market income compared to expenses further detracted from Fund returns.

Share Price Performance

The market price per Fund share increased 4.13% in Q1 2024 compared to a 3.73% decrease in Q1 2023.

Revenue and Profit Analysis

Q1 2024 vs. Q1 2023

The Fund had net income of $69 million in Q1 2024 compared to a net loss of $95.6 million in Q1 2023.

Key drivers were:

  • Higher futures contract price changes ($52.8 million gain in Q1 2024 vs $47.2 million loss in Q1 2023)
  • Improved net realized gains/losses ($(2.6) million loss in Q1 2024 vs $(70.3) million loss in Q1 2023)

The Fund earns interest income on its holdings in Treasury and money market instruments. This Treasury income is expected to exceed Fund expenses over time.

When combined with futures contract price appreciation, this Treasury income has contributed to the Fund’s net asset value per share consistently exceeding the Index level in recent years.

However, the Fund’s primary objective is to track the performance of the Index. There is no assurance Fund returns will continue to outperform the Index.

Strengths and Weaknesses

Key Strengths

  • The Fund provides exposure to a broad basket of commodity futures with the aim of diversification.
  • An experienced managing owner oversees trading and management of the Fund.
  • As an ETF, the Fund offers transparency, liquidity, and convenience to investors.

Potential Weaknesses

  • Commodity investments can be volatile and risky in the short term.
  • There is no guarantee the Fund will achieve its objective of tracking the Index.
  • Contango markets could cause the Fund’s returns to lag the Index over time.

Future Outlook

The global economy is expected to continue expanding at a modest pace in 2024 and 2025. This should support steady demand for commodities.

However, downside risks remain including ongoing geopolitical conflicts, inflation concerns, and potential tighter monetary policy. These could introduce volatility.

Positioning

The Fund plans to maintain exposure to a diversified portfolio of commodity futures contracts in proportion with the Index. This provides broad commodity investment.

If the Fund nears positional limits on certain contracts, it may shift exposure to other allowed futures contracts that tend to track the performance of those commodities.

No changes to the Fund’s investment objective or strategy are currently anticipated.

Final Thoughts

The Invesco DB Commodity Index Tracking Fund offers exposure to commodity futures markets. The Fund saw positive performance in Q1 2024 driven by futures market tailwinds.

Going forward, diversification across commodities could help mitigate volatility risk. But commodities remain risky assets that tend to be cyclical in nature.