By Olly Ludwig From ETF Watch

Invesco PowerShares, fresh from inking a proposed deal to next year take over an 11-fund suite of futures-based commodity ETFs from Deutsche Bank, today rolled out a different kind of commodity ETF that will allow investors to be taxed just as they are when they hold equity funds.

The PowerShares DB Optimum Yield Diversified Commodity Strategy Portfolio* (PDBC) is an actively managed fund that will also hold futures contracts, but will do so through a Cayman Islands-based unit. That Cayman Islands structure, already used by a number of other ETF sponsors, exploits a loophole in U.S. tax law and will allow the fund to avoid using “K-1” tax forms reserved for futures investments.

The 11 funds PowerShares plans to take over from Deutsche Bank next year, including the nearly $5 billion PowerShares DB Commodity Index Tracking Fund (DBC | B-86), are taxed using “K-1” tax forms. Enough investors and advisors dislike “K-1” forms and the particularities of futures-investment taxation to make the pursuit of funds such as the new “PDBC” a worthwhile initiative.

Explaining its motivation to enter into the transaction with Deutsche, Invesco PowerShares said in a press release that it aims to fully develop a suite of futures-focused ETF offerings, including funds like the new “PDBC” that will use “1099” tax forms required of funds registered under the Investment Company Act of 1940.

It’s no accident the tickers “DBC” and “PDBC” are so similar. Side by side, they constitute a complete reflection of the choices investors have to obtain futures-related exposure.

The new PowerShares fund, PDBC, comes with a net annual expense ratio of 59 basis points, or $59 for each $10,000 invested.

One of the ETF market’s commodity funds using the Cayman Islands structure is the First Trust Global Tactical Commodity Strategy (FTGC | C-66). The fund has total assets under management of around $200 million and has an annual expense ratio of 95 basis points.

For more on this story go to: http://www.etf.com/sections/daily-etf-watch/23758-daily-etf-watch-new-commodity-fund.html

*PowerShares DB Optimum Yield Diversified Commodity Strategy Portfolio

Summary Information

Investment Objective

The PowerShares DB Optimum Yield Diversified Commodity Strategy Portfolio (the “Fund”) seeks long term capital appreciation.

Fund Fees and Expenses

This table describes the fees and expenses that you may pay if you buy and hold shares of the Fund (“Shares”). Investors may pay brokerage commissions on their purchases and sales of Shares, which are not reflected in the table or the example below.

Annual Fund Operating Expenses

(expenses that you pay each year as a percentage of the value of your investment)

Management Fees                                                                           0.59%

Other Expenses(1)                                                                         0.00%

Acquired Fund Fees and Expenses(2)                                         0.10%

Total Annual Fund Operating Expenses                                      0.69%

Fee Waiver and/or Expense Reimbursement(3)                       0.10%

Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement                                                                       0.59%

(1)      Other Expenses are based on estimated amounts for the current fiscal year.

(2)      Acquired Fund Fees and Expenses are indirect fees and expenses that the Fund incurs from investing in the shares of other investment companies (including money market funds). Acquired Fund Fees and Expenses are based on estimated amounts for the current fiscal year.

(3)      Through February 29, 2016, Invesco PowerShares Capital Management LLC (the “Adviser”) has contractually agreed to waive a portion of the Fund’s management fee in an amount equal to 100% of the net advisory fees an affiliate of the Adviser receives that are attributable to certain of the Fund’s investments in money market funds managed by that affiliate. This waiver will have the effect of reducing the Acquired Fund Fees and Expenses that are indirectly borne by the Fund. The Adviser cannot discontinue this waiver prior to its expiration.

Example

This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other funds. This example assumes that you invest $10,000 in the Fund for the time periods indicated and then sell all of your Shares at the end of those periods. The example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses are equal to the Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement in the first year and the Total Annual Fund Operating Expenses thereafter. This example does not include the brokerage commissions that investors may pay to buy and sell Shares. Although your actual costs may be higher or lower, your costs, based on these assumptions, would be:

1 Year $60                3 Years $211

Portfolio Turnover

The Fund pays transaction costs, such as commissions, when it purchases and sells securities (or “turns over” its portfolio). A higher portfolio turnover will cause the Fund to incur additional transaction costs and may result in higher taxes when Shares are held in a taxable account. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the example, may affect the Fund’s performance. At the date of this Prospectus, the Fund has not yet commenced operations and turnover data therefore is not available.

For more:

http://www.sec.gov/Archives/edgar/data/1595386/000119312514397679/d814377d497.htm

IMAGE: ihrib.org