ETF Securities already has two products giving investors exposure to the front-month contracts of both futures. Nik Bienkowski, head of listings and research, said more sophisticated ETF investors had expressed interest in the futures-curve contracts. “Over the past couple of years people have come to understand what contango and backwardation is. People have looked for different strategies to increase that effect or gain in other parts of the curve, as investors’ knowledge of these markets increases,” he said.
Acting as a hedge provider, London-based oil giant Shell will hold the underlying futures contracts, which will all have December maturities. Each ETF’s holding of the various December contracts will be adjusted monthly to keep its average maturity in line with its one-, two- or three-year target. “So for our one-year product they’d be holding December 2007-December 2008 contracts, and for our two-year product they’d be holding December 2008-December 2009 contracts,” Bienkowski explained.
ETF Securities will take a 0.49% annual fee to manage the new funds. It currently has $200 million in assets under management across its two front-month oil ETFs, and is hoping to attract $500 million to the extended range over the next year.