KRBN ETF : Holding more cash than actual carbon futuresKRBN tracks the global carbon allowances prices in Europe, the UK and the US which did really well in 2020-2021 albeit at high volatility.
However, as we entered 2022 KRBN price started to decline then now recovering slowly.
Somehow over the past year and till now in 2023, its holdings of cash and bonds have increased up to 85% of the total holdings.
I understand interest rates have been high and holding more cash in 2022 is the safest option to take amidst the uncertain global and geopolitical market environment. The dividend payout was also much higher in 2022 vs 2021. Moreover, it provides a very comfortable cushion if there is a sudden drop in the carbon futures caused by the Russia-Ukraine war.
However, I can't help to feel like a big opportunity loss when the carbon allowance futures prices actually did well e.g. California carbon allowance.
Given that the tenure of the ETF is barely 3 years old, I believe this reflects how the fund managers for the ETF take into consideration of the risks and really did try to stabilise the KRBN prices.
Now that the carbon futures have proven that they are resilient to geopolitical changes, I hope the fund managers will start using the cash and increase exposures in the carbon allowance futures and allocate base on their expertise.
