New iShares ETF improves experience for commodity investors by
eliminating Schedule K-1 tax reporting
Futures roll methodology aims to reduce negative impact of
‘contango’
NEW YORK--(BUSINESS WIRE)--
BlackRock, Inc. (NYSE: BLK) launched the iShares Commodities Select
Strategy ETF (NASDAQ: COMT), the first ETF to provide long-only, broad
exposure to commodities in a ’40 Act regulated structure. COMT
innovatively provides cost-effective, simple access to a diversified mix
of commodities through futures and commodity-related companies. The fund
manager uses a roll methodology designed to minimize the negative return
impact of ‘contango’, which describes a term structure of the futures
curve where the future price is above the expected future spot price.
Additionally because the fund is regulated under the ’40 Act investors
will not receive a Schedule K-1 tax reporting form at tax time. Instead,
taxable gains and distributions will be reported on Form 1099, the
typical tax report used by the vast majority of mutual funds and ETFs.
Patrick Dunne, Head of iShares Global Markets and Investments at
BlackRock, said, “Commodity investments have traditionally provided
investors with attractive total returns and strong diversification
characteristics. COMT is intended to be an all-in-one commodity solution
by providing comprehensive commodity exposure in a smarter, more
efficient way through both futures and equities; removing a tax barrier
that may have kept investors away from commodities and utilizing a roll
methodology that seeks to improve returns.”
COMT delivers direct access to commodity prices via futures contracts,
including agriculture, livestock, energy, industrial metals, and
precious metals. The fund manager uses a futures roll process designed
to improve returns by minimizing the negative impacts of contango and
seeks to benefit from the opposite of contango, known as ‘backwardation’.
In addition to futures, the fund invests a portion of its assets in
stocks of commodity producers to maintain diversified commodities
exposure.
COMT has a simplified tax treatment compared to most commodity funds.
Most commodity funds are structured as publicly-traded partnerships, and
have a pass-through taxation structure. This effectively shifts the
income tax liability from the fund earning the income to the
shareholders who hold the fund. Unlike such commodity funds, COMT will
report taxable gains and distributions on a Form 1099, the standard tax
reporting form for mutual funds and ETFs.
Daniel Gamba, Head of iShares Americas Institutional Business at
BlackRock, said, “We’re always innovating to solve our clients’
problems. We created this particular product to solve a common problem
we’ve heard from many of our clients that invest in commodities. They
want diversified commodities exposure through an ETF, but they don't
want the cumbersome K-1 tax reporting that comes with existing
approaches. So we created a long-only, diversified commodities ETF
without the Schedule K-1, the first ETF of its kind.”
About BlackRock
BlackRock is a leader in investment management, risk management and
advisory services for institutional and retail clients worldwide. At
September 30, 2014, BlackRock’s AUM was $4.525 trillion. BlackRock helps
clients meet their goals and overcome challenges with a range of
products that include separate accounts, mutual funds, iShares®
(exchange-traded funds), and other pooled investment vehicles. BlackRock
also offers risk management, advisory and enterprise investment system
services to a broad base of institutional investors through BlackRock
Solutions®. Headquartered in New York City, as of
September 30, 2014, the firm had approximately 12,100 employees in more
than 30 countries and a major presence in key global markets, including
North and South America, Europe, Asia, Australia and the Middle East and
Africa. For additional information, please visit the Company’s website
at www.blackrock.com
| Twitter: @blackrock_news
| Blog: www.blackrockblog.com
| LinkedIn: www.linkedin.com/company/blackrock
About iShares
iShares is a global product leader in exchange traded funds with over
600 funds globally across equities, fixed income and commodities, which
trade on 20 exchanges worldwide. The iShares Funds are bought and sold
like common stocks on securities exchanges. The iShares Funds are
attractive to many individual and institutional investors and financial
intermediaries because of their relative low cost, tax efficiency and
trading flexibility. Investors can purchase and sell shares through any
brokerage firm, financial advisor, or online broker, and hold the funds
in any type of brokerage account. The iShares customer base consists of
the institutional segment of pension plans and fund managers, as well as
the retail segment of financial advisors and high net worth individuals.
Carefully consider the Funds’ investment objectives, risk factors,
and charges and expenses before investing. This and other information
can be found in the Funds’ prospectuses and, if available, the summary
prospectuses which may be obtained by visiting www.iShares.com
or www.BlackRock.com.
Read the prospectus carefully before investing.
Investing involves risk, including possible loss of principal.
Transactions in shares of the iShares Funds will result in brokerage
commissions and will generate tax consequences. iShares Funds are
obliged to distribute portfolio gains to shareholders. Shares of the
iShares Funds may be sold throughout the day on the exchange through any
brokerage account. However, shares may only be redeemed directly from a
Fund by Authorized Participants, in very large creation/redemption
units. There can be no assurance that an active trading market for
shares of an ETF will develop or be maintained. Diversification may not
protect against market risk or loss of principal.
The iShares Commodities Select Strategy ETF is actively managed and does
not seek to replicate the performance of a specified index. The Fund may
have a higher portfolio turnover than funds that seek to replicate the
performance of an index.
The iShares Commodities Select Strategy ETF is a commodity pool, as
defined in the Commodity Exchange Act and the applicable regulations of
the Commodity Futures Trading Commission, or “CFTC,” and is managed by
its Advisor, BlackRock Fund Advisors, a commodity pool operator
registered with the CFTC.
The Fund's use of derivatives may reduce the Fund's returns and/or
increase volatility and subject the Fund to counterparty risk, which is
the risk that the other party in the transaction will not fulfill its
contractual obligation. Commodity futures trading may be illiquid. In
addition, suspensions or disruptions of market trading in the
commodities markets and related futures markets may adversely affect the
value of the Fund. Certain derivatives may give rise to a form of
leverage and may expose the Fund to greater risk and increase its costs.
To the extent that the Fund invests in rolling futures contracts, it may
be subject to additional risk. An increase in interest rates may cause
the value of fixed-income securities held by the Fund to decline.
Investing in commodity-linked derivatives and commodity-related
companies may increase volatility. Price movements are outside of the
fund’s control and may be influenced by weather and climate conditions,
livestock disease, war, terrorism, political conflicts and economic
events, interest rates, currency and exchange rates, government
regulation and taxation. Commodity futures trading may be illiquid. In
addition, suspensions or disruptions of market trading in the
commodities markets and related futures markets may adversely affect the
value of the Fund.
International investing involves risks, including risks related to
foreign currency, limited liquidity, less government regulation and the
possibility of substantial volatility due to adverse political, economic
or other developments. These risks often are heightened for investments
in emerging/developing markets and in concentrations of single countries.
The Funds are distributed by BlackRock Investments, LLC (together with
its affiliates, “BlackRock”).
©2014 BlackRock. All rights reserved. iSHARES, BLACKROCK, iBONDS and
BLACKROCK SOLUTIONS are registered trademarks of BlackRock. All
other marks are those of their respective owners. iS-13741-1014

BlackRock, Inc.
Christine Hudacko, 415-670-2687
Christine.Hudacko@blackrock.com
Melissa
Garville, 212-810-5528
Melissa.Garville@blackrock.com
Source: BlackRock, Inc.