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Commodities on tap for iFunds Fof

iFunds is introducing a fund of funds that will look to
invest mainly in commodity exchange-traded funds.

The fund firm, which is owned by Raymond James Investment Services, says the MFM iFunds ETF commodity fund will primarily provide exposure to commodity-related shares as well as underlying commodities indices such as oil, metals and natural gas.

The fund, which is administered by Marlbrough Fund Managers, has a minimum investment of 1,000. It will use a core and satellite approach, with stockpicking and asset allocation driven by a bespoke quants system devised by iFunds investment director Nigel Baynes and IT director Paul Hudson.

An ETF based on the Reuters/Jeffries CRB index will form the core of the portfolio, while satellite ETF holdings will provide exposure to individual sectors that are outperforming the index.

Baynes, who is lead manager on the fund, has the freedom to invest in investment trusts and Oeics but his preference will be ETFs and direct commodity shares.

According to iFunds, the Oeic fund of funds structure makes ETFs more attractive and accessible to IFAs because ETFs are typically low-cost vehicles, which makes it difficult for commission to be paid to IFAs. With the fund of funds approach, the fund manager is responsible for trading the funds, allowing iFunds to justify the 5 per cent initial charge and 1.75 per cent annual charge, from which commission is paid.

Sales and marketing director Stacey Ash says: “We launched the fund to reduce investors’ reliance on major equity market returns. Over the long term, commodities do not correlate with equities. Sometimes they move together, which has happened recently, but we are starting to see this correlation break down. Commodities have kept going up while equities have not.”

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