There are two types of ETFs in this batch, one will be individual commodities and the other will be commodity baskets.
Single Commodities
- Aluminum
- Coffee
- Copper
- Corn
- Cotton
- Crude
- Gasoline
- Gold
- Heating oil
- Lean Hogs
- Live cattle
- Nat Gas
- Nickel
- Silver
- Soybean Oil
- Soybeans
- Sugar
- Wheat
- Zinc
- All Commodities
- Agriculture
- Energy
- Ex-energy
- Grains
- Industrial metals
- Livestock
- Petroleum
- Precious Metals
- Softs (I assume this means soft commodities)
This is a double edged sword. In general I am all for having the choice of being able to access narrow themes like these but there will be people that use them incorrectly and hurt themselves because of it. It is not clear to me that too many do-it-yourselfers need to separate nickel from zinc.
The industrial metal ETF will be a great tool for capturing the early stages of future economic recoveries and expansions. Some aspect of industrial metals are present in some of the current commodity products already out there but isolating this one part offers some appeal.
Another basket that makes a good first impression (conceptually anyway) is the Soft Commodity basket which I assume will be sugar, soybeans, coffee, maybe rice and a couple of others-of course this might be the Agriculture basket instead (not much detail yet) but either way access to food stuffs seems like another positive.
The advantage to these, vs the existing broad based products that already exist, is that you can control how much of your commodity exposure goes to what type of asset.
The single commodity ETFs have merit too but these are more dangerous, fair warning.
9 comments:
The questions are ...
Does it track spot or contract?
If contract, which? And how does it roll over?
What is the tracking error?
How is it arbitraged to track correctly?
All great questions, take the post as a press release with a tad of color. More info will come from them soon and when it does I will relay it here.
My understanding is that these will work similalrly to the existing OILB.L product: i.e. they will track the contract, rolling futures. I believe OILB.L rolls from front month to second month over 5 days, rolling 20% exposure a day shortly before expiry. Haven't seen detail on these new toys but I wouldn't be surprised if they were structured in the same way.
So, investors are exposed to (positive or negative) roll yield as well as to changes in spot: I can't exactly see the UK press getting that concpet over to investors here. Retail investors in the UK have not exactly seized the chance to use straight equity ETFs, so I would be very surprised if these see a lot of retail usage: experienced traders will maybe use them, but I imagine usage mostly will be by professional managers.
Softs do not include soybeans and rice. Those are agriculture and grains. Softs include sugar, cocoa, cotton and frozen OJ.
Yikes.
thank you for the info on "soft"
These things are for the "Global Macro Hedge Fund in my E*Trade Account" crowd.
Serious investors can get all the commodity exposure they need/want with DBC or GSG.
...Might be time to get out of commodities.....
huh?
g
Maybe it's not about "commodity exposure" but about small players directly accessing a specific trend in the markets, e.g. coffee.
Check the contracts on coffee, but before you do, go back to the Tsunami and check that date.
A small player, who didn't necessarily have the inclination to open a futures account, the funds to buy the futures, or the time to educate him/herself about the specifics of contract rollover, could have captured a nice trend.
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