Daily ETF Watch: Commodity Funds Planned

November 11, 2015

Elkhorn Investments, the firm founded by former Invesco PowerShares head Ben Fulton, has filed for two new funds covering the commodity futures space. The Elkhorn S&P GSCI Dynamic Roll Commodity ETF and the Elkhorn RAFI Commodity ETF will both offer actively managed exposure to commodities with a smart-beta twist.

The former, according to its prospectus, is actively managed. It invest in commodities included in the S&P GSCI Dynamic Roll Index to a certain extent but will also include an actively managed portfolio of very liquid and short-duration, high-quality bonds in an effort to achieve excess returns.

The benchmark index is an alternative version of the production-weighted S&P GSCI, an index of 24 commodities that includes near-month contracts. However, the fund’s benchmark can include contracts that are further out on the futures curve in order to lessen the effects of contango.

The commodity portion of the fund will be managed by a Cayman Islands-based subsidiary that will represent up to 25 percent of the portfolio, with the fixed-income portion representing the remainder of the portfolio. Presumably, the investment in the foreign subsidiary will provide tax advantages to the fund.

Meanwhile, the latter fund will also be actively managed and have a similar structure, with a fixed-income portfolio and a Cayman Islands subsidiary. However, the index it will seek to outperform is the Dow Jones RAFI Commodity Index, an index that is weighted by a combination of price momentum and roll yield, and that covers 24 commodities. The index can include contracts expiring up to 24 months out on the futures curve.

Both funds seem similar to the actively managed First Trust Global Tactical Commodity Strategy Fund (FTGC | C), which has $202 million in assets under management and launched in 2013. It is currently the only actively managed commodity fund and, like the proposed Elkhorn funds, invests in a Cayman Islands subsidiary that holds commodities.

Neither filing included a ticker or expense ratio, but the funds are slated to list on the BATS exchange.


Contact Heather Bell at [email protected].

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