The PowerShares DB Agriculture Fund (NYSEARCA: DBA) is an exchange-traded-fund (ETF) that holds a portfolio of 10 agricultural commodities from corn, cocoa and cotton to soybeans, lean hogs, cattle and wheat. The ETF tracks the performance of the Deutsche Bank IQ Diversified Agriculture Index Excess Return. The index is composed of futures contracts on the most liquid and commonly traded agricultural commodities. The index itself can't be traded, so DBA is one of the best ways to gain exposure to the index. The ETF was launched on Jan. 5, 2007, and has a -1.74% average annual return (AAR) since inception. DBA is used by investors seeking exposure in the agricultural commodities sector. Since short-selling is available, it can also be used to hedge portfolio exposure to the agricultural sector. A rise in food prices is the first noticeable sign of rising inflation, so agriculture commodities make a popular inflation hedge. As of April 15, 2016, DBA had a one-year AAR of -6.91%, a year-to-date (YTD) performance of -0.34% and a 0.71% expense ratio.
Top Institutional Owners
Institutions owned 28.4% of the 31.2 million outstanding shares of DBA, as of March 29, 2016. The top four institutional holders of DBA are Bank of America private banking (NYSE: BAC) with 4%, Invesco Advisors Inc. (NYSE: IVZ) with 3.8%, QS Investors LLC, with 3.6% and The Guardian Life Insurance Co. of America, with 3.3% of outstanding shares, as reported on Dec. 31, 2015. Bank of America's wealth management and private banking subsidiary Merrill Lynch, Pierce, Fenner & Smith is the largest owner of DBA. Since DBA is a popular inflation hedge, it would make sense to include it in a well-balanced portfolio for clients. Furthermore, because DBA is issued by Invesco, it makes sense that the issuing company would retain a large stake in the product.
QS Investors LLC is a global quantitative equities provider based out of New York and Boston. Formed in 1999, QS is an innovator of quantitative applications for global asset managers creating valuation models, risk identification and dynamic weightings adapting to changing market and economic environments. On March 4, 2014, Legg Mason Inc. (NYSE: LM) purchased the firm, which had almost $100 billion in assets under advisory. QS Investors has become a wholly owned and independently managed affiliate of Legg Mason Inc. This company integrates unique quantitative analysis and behavioral insights into actively managed equities, liquid alternatives and customized solutions for institutional clients worldwide. Inflation hedge could also be rational for the 3.3% stake by Guardian Life Insurance. The insurer likely has complex cross-asset derivatives that need to be properly hedged or included as a component.
The largest transactions could be for rebalancing purposes, hedging or directional bets. Invesco Advisors made the largest buy transaction, adding 1.17 million shares, as the issuer of DBA. QS Investors LLC upped its stake by 195,000 shares to 3.6%, likely due to rebalancing for portfolios and quantitative program-driven strategies. Notably, Charles Schwab Investments (NYSE: SCHW) divested all holdings of 2.61 million shares, followed by Invesco Canada, with 1.3 million shares sold. Bank of America sold 871,000 shares but still retains the largest stake of 4% of outstanding shares.
Investor Types and Activity
The largest investors in DBA are investment advisors, with 12%, followed by private banking and wealth management at just over 6%, brokers at just over 4% and individuals at around 3.7% of outstanding shares. The average daily trading volume is 326,000 shares. The majority of institutional transactions have been selling, hedging or divesting positions. The most active sellers are Investment advisors, private banking and wealth management, mutual fund managers and hedge fund managers.