By Karl Heilman
St. LOUIS (ResourceInvestor.com) — The commodities price boom continues to provide momentum to the Exchange Traded Fund wave. Today, ETF Securities announced the offering of 29 new Exchange Traded Commodities (ETCs) on the London bourse.
For investors big and small, novice and sophisticated, this launch offers a simple, straight-forward way to take full advantage of the commodity bull-run.
The 29 new securities comprise 19 regular ETCs and 10 index securities spanning aluminum to zinc.
Commenting on the new investment opportunities, investing guru and managing member of Grandich Publications, Peter Grandich, told Resource Investor that, “It’s not so much the size but the numerous commodity plays that will now be available that’s significant.”.
“For the small and/or novice investor, they’re (ETFs) the only way to go. Also traders who want to move in and out within a days worth of trading are far better suited with an ETF than a mutual fund since the fund is only priced at the end of each days trading,” Grandich said.
“This will be the first time all of these major 19 commodities will be traded on the same exchange and in the same time zone. Investors will be able to hold all 29 securities in ordinary brokerage accounts and investors will only need to visit one website, and one exchange to view pricing and to trade all these commodities.” Nik Bienkowski, of ETF Securities, told RI.
Bienkowski added: “These securities will appeal to all investor types. The simplicity and accessibility of ETCs makes them appealing to retail investors while the ease to execute a wide variety of trading strategies makes them appealing for sophisticated investors. We have even had some medium sized airline companies buying our oil securities to hedge their fuel price exposure.”
ETCs (Commodity ETFs) are securities that track particular commodities, yet trade like a stock. Rather than take physical delivery on commodities and without futures trading, ETFs allow investors to own as little as one share, short, and buy on margin. ETFs are liquid and can be bought and sold intraday.
Additonally, the fees involved with ETFs are clearly laid out in advance, and entry and exit barriers are minimal.
The broad array of ETCs are expected to be available for investment and trade within the next couple of weeks.
Investors will need to trade through brokerage accounts which provide approved access to UK markets.
Perhaps one of the more interesting aspects of having 19 separate and varying ETCs available on one exchange is the flexibility it will give commodity investors in hedging against certain industry downturns. Now, rather than having investments bounce around the world in a number of different exchanges, investors have a simple and convenient manner to do much of their commodity trading in one place.
Bienkowski added: “For example, Exxon is more correlated to the S&P 500 Index than to crude oil. For sophisticated investors who might hold a large investment in BHP for example, if you think copper is falling and will cause BHP’s price to fall, it might be easier to short say, $10 million of our copper securities than to sell a $100 million position in BHP.”
ETFs have grown greatly in popularity throughout the world. On a global scale, there are over $14 billion in assets in ETFs, and they have been available for a relatively short period of time. The simplicity of ETFs makes them an appealing option for the entire spectrum of investors and are also doing a large part to bring commodity investing into the mainstream.
As, Peter Grandich said, it’s “Only a question of when, not if, something like this comes to the States.”
Perhaps the more pointed question is how investors can tolerate the SEC’s stifling of similar innovation in the US. How is it that these products can be launched more rapidly and with such diversity in a less liquid market?