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Is Invesco DB Energy Fund (DBE) a Hot ETF Right Now?

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The Invesco DB Energy Fund (DBE) was launched on 01/05/2007, and is a smart beta exchange traded fund designed to offer broad exposure to the Energy ETFs category of the market.

What Are Smart Beta ETFs?

For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.

Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.

But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.

These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.

Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.

Fund Sponsor & Index

The fund is managed by Invesco. DBE has been able to amass assets over $243.67 M, making it one of the average sized ETFs in the Energy ETFs. Before fees and expenses, this particular fund seeks to match the performance of the DBIQ Optimum Yield Energy Index Excess Return.

The DBIQ Optimum Yield Energy Index Excess Return Index is a rules-based index composed of futures contracts on some of the most heavily traded energy commodities in the world: Light Sweet Crude Oil (WTI); Heating Oil; Brent Crude Oil; RBOB Gasoline; & Natural Gas. It is intended to reflect the performance of the energy sector.

Cost & Other Expenses

Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.

Operating expenses on an annual basis are 0.75% for DBE, making it on par with most peer products in the space.

The fund has a 12-month trailing dividend yield of 0%.

Sector Exposure and Top Holdings

Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.

Taking into account individual holdings, Nymex Light Sweet Crude Oil Future (CLH9) accounts for about 24.44% of the fund's total assets, followed by Ice Brent Crude Oil Future (COF9) and Nymex Ny Harbor Ulsd Futures (HOM9).

Its top 10 holdings account for approximately 99.95% of DBE's total assets under management.

Performance and Risk

DBE has gained about 14.87% so far this year, and as of 07/30/2018, is up roughly 38.39% in the last one year. In the past 52-week period, the fund has traded between $11.70 and $17.29.

The ETF has a beta of 0.68 and standard deviation of 25.78% for the trailing three-year period, making it a high choice in the space. With about 5 holdings, it has more concentrated exposure than peers.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.


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