Daily ETF Watch: Active Oil Fund Filed

ProShares files for actively managed oil futures ETF.

Reviewed by: Heather Bell
Edited by: Heather Bell

A recent filing from ProShares outlines plans for an actively managed oil futures ETF. The ProShares Crude Oil Strategy ETF will provide exposure primarily to the West Texas Intermediate (WTI) crude oil futures markets, the prospectus said.

That exposure will be achieved indirectly via a Cayman Islands subsidiary that will mainly hold first-, second- and third-month WTI crude oil futures contracts that will be selected at the manager’s discretion based on liquidity and the costs of the positions, according to the prospectus. Essentially the manager will seek to keep a lid on exposure to contango and negative roll yield, two things that have plagued oil futures lately.

The fund will invest up to 25% of its assets in its Cayman Islands subsidiary, but the rest of the portfolio will consist mainly of money market instruments. The prospectus notes that the fund will maintain at least some exposure to the WTI futures, even when the market is unfavorable.

All other ETFs providing pure exposure to oil futures are based on indexes, but with oil markets struggling for some time, a fund with the discretion to manage its exposure may make sense to many. The $450 million PowerShares DB Oil Fund (DBO | D-59) tracks an index that selects the contract with the most promising roll yield rather than rolling into the near-month contract. The proposed ProShares fund has a similar strategy, but it’s not constrained by a schedule or index rules.

The filing did not include a ticker, expense ratio or listing exchange.

Contact Heather Bell at [email protected].

Heather Bell is a former managing editor of etf.com. She has also held editorial positions at Dow Jones Indexes and Lehman Brothers. Bell is a graduate of Dartmouth college and resides in the Denver area with her two dogs.