25 Sep 2007, Mark Pengelly, Risk magazine
The funds will be linked to a set of indexes referencing three-month forward prices for individual commodities and commodity baskets. ETF Securities is the first licensee of the new Dow Jones-AIG Commodity indexes that are constituted from an array of three-month futures contracts traded on major exchanges. Their underlying commodities are as diverse as lean hogs, coffee, zinc and natural gas.
The 29 forward commodity ETFs complement another 29 that ETF Securities already offers linked to the spot prices of these commodities and baskets. Nik Bienkowski, the firm’s director of research and listings, said the new products would allow ETF investors to play different parts of the futures curve for each commodity or basket, potentially benefiting from contango or backwardation. Although buying or selling shares in them incurs transaction fees on the LSE, all 58 funds have the same annual management fee of 0.49%.
Akin to the oil futures curve ETFs, the new funds will work by holding underlying futures contracts of different maturities and rolling a set proportion of them on a regular basis to maintain an average maturity at the three-month point (see: First oil futures curve ETFs listing on LSE).
The 29 spot commodity and commodity basket funds that have already launched have attracted more than $1 billion in assets since September 2006, according to ETF Securities. They are listed on five European stock exchanges including the LSE, Deutsche Börse, Euronext Paris, Euronext Amsterdam and Borsa Italiana.
Amid strong growth, Morgan Stanley recently predicted the volume of assets under management within ETFs could grow to as much as $2 trillion globally by 2011 (see: ETF growth means AUM will top $2 trillion by 2011).
Previously from Risk News:
Deutsche Bank launches ETF linked to S&P CNX Nifty index
Deutsche ETF juggernaut rolls on