From A(luminum) To Z(inc)

September 05, 2006

ETF Securities announces plans to launch 29 new commodities ETFs, including 19 individual commodity funds.

ETF Securities - the team behind the first gold bullion and oil exchange-traded funds (ETFs) - announced plans to launch 29 new exchange-traded commodity funds (ETCs) onto the London Stock Exchange (LSE).  The new funds include 19 separate individual commodity ETFs, 9 "sector" funds and 1 broad market fund tied to the well-known Dow Jones/AIG Commodities Index (DJAIG-CI).

The company says it will roll out the entire platform of products "over the next few weeks."

The 19 individual funds cover the following commodities, with each fund tracking its own individual commodity index (The indexes were launched by Dow Jones-AIG  in April of this year):

Aluminum

Crude Oil

Live Cattle

Soybeans

Coffee

Gasoline

Natural Gas

Sugar

Copper

Gold

Nickel

Wheat

Corn

Heating Oil

Silver

Zinc

Cotton

Lean Hogs

Soybean Oil

 

Importantly, the indexes - and the ETCs - reflect the performance of an investment in futures for each commodity, not the underlying spot price of the commodity itself.  A futures investment has three elements to its return: the spot price, the interest earned on collateral cash invested in Treasuries, and the "roll yield" from "rolling" the futures position from expiring contracts to fresh contracts each month.

Often, the "roll yield" is the largest single factor in the return. Historically, that has been good news for investors, as the "roll yield" for most commodities has been positive. Recently, however, many commodities futures have traded in "contango," with futures investments losing to spot prices in tight markets like oil.

Of course, that could change at any time.

The sector funds, for their part, track futures-based indexes created by Dow Jones, comibining the individual product futures into nine groups:

Agriculture

Ex-Energy

Livestock

Energy

Grain

Petroleum

Softs*

Industrial Metals

Precious Metals

*Softs are tropical agricultural products like sugar and cotton.

 

 

The "All Commodities" fund tracks the traditional Dow Jones - AIG Commodities Index, one of the most recognized commodities indexes.

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