ETF Securities rolls out new Bloomberg commodity ETFs

Jul 11th, 2017 | By | Category: Commodities

London-based ETF Securities has listed two new broad commodity ETFs on the London Stock Exchange, tracking two indices from the Bloomberg Commodity Index family.

ETF Securities rolls out new Bloomberg commodity ETFs

ETF Securities now offers three ETFs tracking broad commodity indices created by Bloomberg.

The ETFS All Commodities GO UCITS ETF (BCOG) tracks an index of front month commodity futures and may be used as a tactical play, a core diversifier or part of an allocation to an alternatives portfolio.

The fund trades in US dollars and is also listed with a British pounds-denominated share class under the ticker BCOM. Its total expense ratio (TER) is 0.35%.

The underlying Bloomberg Commodity Index is well diversified and contains components in the agriculture (currently approximately 28% index weight), energy (36%), industrial metals (18%), precious metals (13%) and livestock (4%) sectors. The index caps (max 15%) and floors (min 2%) the exposure of any one commodity in the index, resulting in a more balanced index weighting.

The ETFS Longer Dated All Commodities Ex-Agriculture and Livestock GO UCITS ETF (XAGS) tracks an index of longer-dated commodity futures on energy and metals and is likely to appeal to investors seeking broad commodity exposure without an allocation to food-related commodities.

The fund trades in US dollars and is also listed with a British pounds-denominated share class under the ticker XAGG. Its TER is 0.39%.

The underlying Bloomberg ex-Agriculture and Livestock 15/30 Capped 3 Month Forward Index tracks constituents from the energy (44%), industrial metals (34%) and precious metals (22%) sectors. By investing in longer-dated contracts, the index attempts to mitigate some of the costs inherent in rolling the underlying futures.

The two new ETFs are designed for investors who want ‘all-in-one’ access to commodities for growth and diversification, but who wish to avoid the challenges of navigating several sub-sectors themselves via futures.

Commodities tend to have a positive correlation with inflation which can be attractive to certain investors. During periods of high inflation and equity market downturns, commodities have historically outperformed most other asset classes and provided some protection against downside macroeconomic risks.

However, research shows that the degree of inflation-protection varies by commodity. In general, commodities which are storable (ie: not agricultural commodities) tend to provide a better hedge. In this way, XAGS may be better suited for investors seeking this type of protection.

ETF Securities also offers the ETFS Longer Dated All Commodities GO UCITS ETF (COMF) which also trades in British pounds under the ticker CMFP. The fund tracks the Bloomberg Commodity 3 Month Forward Index, providing broad exposure across all commodity sectors while rolling expiring contracts into new contracts with three months remaining to maturity. It has assets under management (AUM) of $540 million and a TER of 0.38%.

According to London-based ETF industry consultant ETFGI, net flows into commodity ETPs in Europe stand at $6.3 billion to date. ETF Securities believes gaining exposure to commodities has become increasingly important as investors become more familiar with the role of raw materials in supporting global growth.

Howie Li, CEO of Canvas, ETF Securities, commented: “Knowledge of the longer-term benefits as well as the understanding of uncorrelated risk contribution by this asset class has increased. With the demand for a well-diversified commodities exposure continuing to grow, we are focused on providing investors with a wider range of broad commodities solutions with a particular focus on efficient transaction costs to help reduce the cost of investing in this asset class.”

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