The First Trust Global Tactical Commodity Strategy ETF, launched on October 21, 2013, has established itself as a fascinating entity within the complex landscape of exchange-traded funds (ETFs). With the ability to trade on the NASDAQ under the ticker symbol FTGC, this specific ETF has encountered a tumultuous yet noteworthy journey, culminating in its ranking as the largest commodity-related ETF in the U.Sas of mid-2022.

As of April 6, 2023, the market capitalization of the First Trust Global Tactical Commodity Strategy ETF languished at a mere $2.98 billion—almost halved from its peak just ten months priorIt’s critical to note that this decline in overall market value doesn’t stem from plummeting trading prices, which have actually experienced hikesRather, it is the significant reduction in share volume that has contributed to this downturn, leading to an intriguing contrast between market dynamics and trading behavior.

A glance at the price movement over recent years reveals a prevailing bullish trend, particularly evident since September 2020. The ETF's price soared from approximately $3.25 to an impressive $23.85, representing an explosive growth trajectory exceeding sixfold

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March 2023 was particularly remarkable, witnessing an increase of over 18% alone—drawing the attention of investors across the board.

Moreover, price volatility has been markedly pronounced, showcasing instances of erratic spikesThere have been notable surges, especially since December 2022, with the ETF soaring 11.21% on December 15 and 18.72% on March 24, 2023. These fluctuations may reflect the interplay between investor sentiment, broader market conditions, and periodic dividends that drive temporary upticks in prices.

This particular ETF distinguishes itself from the majority of its peers, which typically exhibit less volatilityThe anomalies in trading patterns correlate with the ETF’s dividend distribution, as evidenced by the previous spikes occurring on dividend issuance days

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Since 2017, excluding 2020, the ETF has distributed dividends annually, with multiple distributions in some years, albeit with modest payout amounts.

Having issued a total of eight dividends since its inception, the most lucrative was delivered on December 15, 2022, amounting to $2.5279 per shareAt that time, the market opened at $20.308, reflecting a price increase largely attributable to the dividend, which itself eclipsed smaller payouts like the one from March 22, 2018, where the total dividend was merely $0.0095 per share—essentially a cursory distribution.

In addition to its dividend distribution practices, one noteworthy aspect about the First Trust Global Tactical Commodity Strategy ETF is its relatively high expense ratio of 0.95%, placing it within the mid-to-high range among industry competitors

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This ratio has drawn scrutiny from potential investors weighing the benefits of potential returns against ongoing costs.

As of the latest reporting, it has entered a phase marked by significant overselling and substantial capital outflowsReports indicate that the easy-monitoring Financial Terminals observed a minimum of four notable instances of drastic capital withdrawals since December 2022. Such massive withdrawals align closely with the aforementioned dividend announcements and have contributed to the ETF's precarious financial standingUtilizing the Relative Strength Index (RSI) as a measure, the ETF registered an RSI of 28.8 on March 16, indicating substantially oversold conditions—a striking contrast to the S&P 500's RSI of 40.8 at that time.

In terms of asset composition, cash has assumed the lion’s share of holdings within the First Trust Global Tactical Commodity Strategy ETF

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As of April 6, 2023, the ETF held approximately $2.695 billion, constituting around 90.44% of its total $2.98 billion in assetsThis predominance of cash is not surprising given the aggressive monetary policy enacted by the Federal Reserve since March 2022, marked by frequent interest rate hikes that have propelled the baseline rate from near zero to approximately 5%.

Increasing interest rates typically suppress commodity markets in the short term despite long-term prices being heavily influenced by supply-demand dynamics and geopolitical factorsConsequently, investors have shown a proclivity to sidestep direct commodity investments amidst rising rates, opting instead for the safety of cash reservesAs rates rise, the allure of cash as a ‘risk-free’ option grows, further distancing capital from riskier assets like commodities.

In addition to the surplus of cash holdings, the ETF’s top positions also include a selection of commodity futures, though their individual contribution to the portfolio is quite small

Among them are soybean futures, gold futures, and RBOB gasoline futures, each with relatively limited values and proportions in relation to the overall asset mix.

The drastic reductions in the ETF's size appear alarming, particularly given that its investment firm, First Trust, oversees an extensive portfolio of 156 ETFs totaling $126.66 billionDespite this, the First Trust Global Tactical Commodity Strategy ETF has now fallen out of the top ten offerings, positioning itself at the twelfth rank as of this April, a notable decline from its earlier standing.

In stark contrast, other ETFs under the First Trust umbrella have not displayed such significant asset depletionsCompared to the nearly 40% decline experienced by the First Trust Global Tactical Commodity Strategy ETF, products like the First Trust Value Line Dividend Index Fund and the First Trust Rising Dividend Achievers ETF have demonstrated considerably more stability, with variations in their asset sizes far less dramatic.

Historically, First Trust has carved out a niche in the ETF marketplace, though it has not reached the scale of industry stalwarts like BlackRock or Vanguard