SummerHaven Index Management, the Stamford, Conn.-based index provider behind the U.S. Commodity Funds’ broad commodities ETF (NYSEArca: USCI), is again expanding that partnership by licensing its recently launched copper index to the fund provider.
Less than a month ago, U.S. Commodity Funds acquired licenses for SummerHaven’s metals and agriculture benchmarks, in a move the company characterized as an effort to expand its roster of commodities funds beyond single-commodity ETFs.
Now, the ETF company is looking at the copper market for its next fund amid growing investor interest in the base metal that is used in many industrial applications. J.P Morgan and iShares recently filed with the Securities and Exchange Commission to offer copper ETFs as well, though the two will be based on physical holdings, not futures.
The SummerHaven Copper Index (SCI) is made up of Comex high-grade copper futures contracts with maturities of 18 months or less, and maintains positions in liquid portions of the copper futures curve, in a methodology that seeks to maximize backwardation at the expense of contango.
“We are excited to license an index that addresses important issues of storage, contango and backwardation in the copper market while providing returns that are consistent with the performance of copper prices,” John Hyland, U.S. Commodity Funds chief investment officer, said in a press release.
SCI is designed for investors who are seeking risk-adjusted copper returns, SummerHaven said in an earlier press release.
“Physical copper storage costs have averaged more than 3 percent per year over the last decade, and copper futures investors can at least partially avoid these costs when the futures market is backwardated,” SummerHaven partner Kurt Nelson said in the release.
“Physical copper investors don’t earn interest on their physical investment, and the SCI includes full cash collateral return through the 90-day U.S. Treasury Bill rate,” Nelson added.
U.S. Commodity Funds, best known for its $1.7 billion U.S. Oil Fund (NYSEArca: USO) and its $2.5 billion U.S. Natural Gas Fund (NYSEArca: UNG), first partnered with SummerHaven to launch the U.S. Commodity Index Fund in August, its first ETF not focused exclusively on energy.