Daily ETF Watch: Gold Hedged Funds Planned

Daily ETF Watch: Gold Hedged Funds Planned

Proposed ETFs will invest in a combination of stocks and commodity futures.

Reviewed by: Heather Bell
Edited by: Heather Bell

A brand-new filing from Exchange-Traded Concepts outlines plans for two ETFs that will track indexes that combine an equity allocation with a long-only position in gold futures.

The Rex Gold Hedged S&P 500 ETF and the Rex Gold Hedged FTSE Emerging Markets ETF will both be able to gain access to the equity portions of their portfolios via stocks, but also via other ETFs, closed-end funds, futures contracts and depositary receipts (in the case of the emerging market fund). They will access the gold space via a tax-advantaged Cayman Islands subsidiary that can invest “without limitation” in commodity futures, according to the prospectus.

Both funds will equal-weight the notional value of their gold futures allocations and the market capitalization of their equity allocations, rebalancing every two months, although if there is an exceptionally large divergence between the two halves of the portfolios or from the benchmark, rebalancing could occur more often.

The U.S. fund tracks the S&P Goldshares index, which combines the S&P 500 with a gold allocation. The emerging market ETF is tied to the FTSE Emerging Gold Overlay Index, which presumably combines the FTSE Emerging Index with gold futures.

It remains to be seen how much investor interest the funds will track should they launch. There is already a similar strategy trading as an ETN, the Etracs S&P 500 Gold Hedged ETN (SPGH), which tracks an index providing equal-weighted exposure to the S&P 500 and a long position in near-term gold futures. SPGH rebalances on a monthly basis. The note launched in January 2010 and has just $19 million in assets under management.

Exchange Traded Concepts is listed as the advisor of the fund, while Vident Investment Advisory is listed as the subadvisor.

The filing did not include tickers or expense ratios for either fund.

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.