Source commodity ex-agriculture ETF launched on Xetra

May 31st, 2017 | By | Category: Commodities

ETF provider Source has launched a new commodity ETF on Deutsche Börse’s Xetra platform. The Source Bloomberg Commodity ex-Agriculture UCITS ETF (Xetra XAAG) gives investors exposure to a commodity basket that excludes agricultural commodities such as grains, livestock and soft commodities.

Source commodity ETF launched on Xetra

The ETF tracks the performance of 11 commodity futures contracts in the energy, precious and industrial metals sectors.

The ETF tracks the Bloomberg Commodity ex-Agriculture and Livestock 20/30 Capped Index, which is composed of futures contracts on 11 commodities across energy, industrial metals and precious metals.

The components are selected based on four criteria: economic significance, diversification, continuity and liquidity.

Constituents are then weighted by liquidity and global production. Only one component is permitted to reach a maximum weight of 30%. with any excess weight being distributed among the other commodities. The weight of each remaining constituent is restricted to 20%.

The index is currently weighted 45% to energy, 29% to industrial metals and 26% to precious metals. The top three individual components are gold (19%), natural gas (13%) and copper (12%) (as of 22 May 2017).

In order to maintain commodity exposure, the index rolls near-term futures contracts every month over a 5-day roll period. The index is rebalanced monthly and reviewed annually. It has returned -3.7% year-to-date to 22 May.

Chris Mellor, product specialist, Source, commented: “Commodities is a pretty broad asset class. Some investors want exposure to just one commodity, others want exposure to all of them, and others want to diversify but exclude some sectors. Many investors in Europe told us they wanted a simple, competitively priced commodity ETF that excluded the agriculture components.”

The ETF uses a synthetic replication method and has a management fee of 0.19%, plus a swap fee of 0.21%.

The new ETF will likely compete for assets with Commerzbank‘s ComStage Commerzbank Commodity ex-Agriculture EW Index TR UCITS ETF (Xetra: CBCOMM), which has $518 million AUM and an management fee 0.30% plus swap costs, and ETF SecuritiesETFS Ex-Agriculture and Livestock ETC (Xetra: OOEC) with $109m in assets and management fee of 0.49% plus swap costs.

Other options include the Lyxor Commodities Thomson Reuters/CoreCommodity CRB EX-Agriculture TR UCITS ETF and the UBS CMCI ex-Agriculture SF UCITS ETF.

The new ETF is the second commodity ETF launched by Source this year, following the hugely successful debut of its Source Bloomberg Commodity UCITS ETF (LON: CMOD) in January. Since its launch, CMOD has accumulated more than $1.3bn in assets, making in one of the most successful new funds of the year, though much of the assets are thought to belong to one big-ticket client.

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