Teucrium adds fund-of-funds ETF made up of all the ag ETFs it has launched so far.
[This article previously appeared on IndexUniverse.com and is republished here with permission.]
Teucrium Trading, the Santa Fe, N.M.-based firm specializing in futures-based commodity ETFs, launched a multicommodity exchange-traded fund Wednesday that will invest equally in the company’s four pre-existing single-commodity ETFs that target corn, wheat, soybeans and sugar.
The Teucrium Agricultural Fund (NYSEArca: TAGS) will be evenly invested in the Teucrium Corn Fund (NYSEArca: CORN), the Teucrium Wheat Fund (NYSEArca: WEAT), the Teucrium Soybean Fund (NYSEArca: SOYB) and the Teucrium Sugar Fund (NYSEArca: CANE).
According to a TAGS’ prospectus dated Dec. 5 of last year, the fund will come with a total estimated expense ratio of around 1.60 percent. Company officials said that includes 100 basis in management fees, with the rest split about evenly on expenses related to taxes, custodial services and auditing.
When IndexUniverse first wrote about this fund as it was put into registration in April 2011, commodities and agricultural products were in the midst of their second decade of a bull market, as growth in emerging market countries such as China, India and Brazil strained available supplies. Broad-based agricultural ETFs such as the PowerShares DB Agriculture Fund (NYSEArca: DBA) were riding this wave of rising demand, growing rapidly and posting strong returns.
However, a year later, with demand slowing from China, the picture looks different. For now at least, futures-based commodity ETFs have flagging performance and assets are bleeding. On Sept. 20, 2011, for example, DBA had almost $2.95 billion in assets, according to data compiled by IndexUniverse. But as of March 26, 2012, DBA’s assets were down to just under $2 billion, and its share price in the past six months has fallen about 7 percent, according to Google Finance.
The biggest fund by assets included in TAGS is the Teucrium Corn Fund (NYSEArca: CORN), which launched in 2010. It had $119 million in assets last September when the other TAGS underlying funds were launched. Today, CORN’s assets are down to $66.6 million, according to data compiled by IndexUniverse. CORN’s share price has fallen more than 8 percent in that time, according to Google Finance. CORN makes up the lion’s share of Teucrium’s current assets of about $90 million.
The other three TAGS underlying funds are the Teucrium Wheat Fund (NYSEArca: WEAT), which has $5.9 million in assets, the Teucrium Soybean Fund (NYSEArca: SOYB), which has $6.6 million in assets, and the Teucrium Sugar Fund (NYSEArca: CANE), which has $5.4 million in assets.
Some of the assets leaving the commodity futures-based agriculture ETFs may have ended up in agricultural equity ETFs that typically are not as volatile. Last September, the Market Vectors Agribusiness ETF (NYSE: MOO) had $5.42 billion in assets last September, but as of March 26, it had $6.1 billion. In addition, MOO has returned 16.16 percent during the past six months.
According to the fund’s prospectus, TAGS will be rebalanced daily to ensure it always has about 25 percent of its assets invested in each of the four underlying ETFs.
There are certain risks to investing in this futures-based fund, according to its prospectus.
One is the risk that TAGS and its underlying funds will not earn gains sufficient to compensate for the fees and expenses they must pay. Another is that if the share offering for TAGS does not raise sufficient funds to make its future operations possible, TAGS may be forced to terminate and investors may lose all or part of their investments.
The company also has offices in Brattleboro, Vt.—the address identified on the fund's prospectus.