From A(luminum) To Z(inc)

September 05, 2006

"Since launching the first ETC more than 3 years ago, we have seen huge demand for new products," said Graham Tuckwell, chairman, ETF Securities. "With the launch of a record-breaking 29 new securities, we are enabling investors to tap into the ever-increasing appetite for commodities and to trade easily and cheaply on a single platform."

Investors are sure to embrace the funds on many levels.  For starters, the "All Commodities" fund will appeal to investors as a strong, diversified commodities index fund.  The DJ-AIG is widely considered one of the more appealing commodity indexes.

The sector and index funds, in turn, will appeal largely to traders and market timers, as well as investors looking to play individual themes in the market. For instance, many analysts expect corn prices to rise in coming months, as demand for ethanol meets a poor corn crop.  Other users can use the funds to hedge against downturns in certain industries, isolating the performance of the industry from the price movements of its materials.

Similarly, plays on energy (or ex-energy) commodities have an obvious appeal.

The nickel fund is sure to be controversial - and popular - if recent shortfalls in the nickel supply continue.  The London Metal Exchange was forced to intervene in the nickel market in August for the first time since to 1980s, to curb panic buying after analysts said there were only "hours" worth of nickel left in global stockpiles.

Whether some of the more obscure contracts - say, soybean oil - attract attention depends on whether they can steal mind- and market-share away from acutal futures among sophisticated investors.  That strikes some as a long shot, but you never know.

The question for U.S. investors is when they will get their first taste of the individual commodity ETFs. Given strong potential demand, it's probably only a matter of time.

"Commodities used to be considered an 'alternative' investment but due to the development of global capital markets and new financial products like ours, that provide simple market access, commodities are becoming widely accepted as a mainstream asset class."

ETF Securities currently has over $2 billion in its global family of ETCs; that number is sure to grow.

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