Step Two: When to be Invested
We were fully invested in April. This was the right call as real asset investments rallied. RAAX begins to raise a cash position when five or more assets become bearish. This is typically indicative of a systemic market event. RAAX has not raised cash since it launched.
Fund follows rules-based approach for allocation
The VanEck Vectors Real Asset Allocation ETF (RAAX) aims to generate long-term total returns. The fund seeks to ease downside risk through a rules-based approach to determine when to allocate a portion or all of the fund’s assets to cash and cash equivalents. In view of changing market dynamics, the fund reserves the right to allocate 100% to cash during market stress. However, the fund was fully deployed in various real assets in April.
Biggest exposure to diversified commodities futures
The RAAX fund had total net assets of $2.6 million as of April 30. The fund’s allocation process provides exposure to segments with better return profiles while managing overall portfolio risk. The fund’s highest exposure in April was to diversified commodities futures (PDBC) at 30%, followed by agribusiness equities (MOO) at 20%, gold bullion and equities (GDX) at 30%, and oil services and equities (OIH) at 10%.