A Canadian client is considering investing in a publicly traded commodity ETF that tracks the price of crude oil. Which of the following risks is MOST specific to commodities and commodity-linked investments, and less relevant for equity or bond ETFs?

Question: A Canadian client is considering investing in a publicly traded commodity ETF that tracks the price of crude oil. Which of the following risks is MOST specific to commodities and commodity-linked investments, and less relevant for equity or bond ETFs?

Answer options:

• Interest rate risk ✅ Rebalancing and roll yield risk (contango/backwardation)
• Liquidity risk
• Credit risk

Correct answer: Rebalancing and roll yield risk (contango/backwardation)

Explanation: Rebalancing and roll yield risk, arising from the mechanics of rolling over expiring futures contracts in futures-based ETFs, particularly in contango markets (where future prices are higher than spot), is a unique and significant risk specific to commodity investing that is not typically present in traditional equity or bond ETFs.