ETF Securities listened to investors' needs and responded by offering inexpensive, tax-efficient ETFs that deliver broad commodity exposure in a simplified and modernized product, according to Steven Dunn, executive director and head of U.S. distribution.
"We do feel that some people walked away from the asset class from an investment standpoint. We think some people walked away because they just didn't have a good vehicle to do that," Dunn told ThinkAdvisor.
ETF Securities wanted to change that. So, it launched a suite of commodity ETFs — ETFS Bloomberg All Commodity Strategy K-1 Free ETF (BCI), ETFS Bloomberg All Commodity Longer Dated Strategy K-1 Free ETF (BCD) and ETFS Bloomberg Energy Commodity Longer Dated Strategy K-1 Free ETF (BEF) — that are the lowest cost diversified commodity ETFs in the U.S.
"I don't know if because the asset class fell a little bit sleepy during '13, '14, '15 when people weren't particularly interested that it just didn't get swept up in this fee compression aspect," Dunn told ThinkAdvisor. "So what you have is a number of products out there that – to be quite honest – aren't particularly priced attractively."
The average expense ratio in the commodity space, looking at broad-based commodities, is probably high-70s, low-80s basis points, according to Dunn. ETF Securities is bringing to market two products (BCI and BCD) that are 29 basis points and a third (BEF) that is 39 basis points.
The new ETFs also take away the cumbersome K-1 tax form filing requirements by relying on a '40 Act structure.
"Typically K-1s don't have to be issued until after most people already file their taxes and so if you have a product that issues a K-1, you may have to file for an extension which is a hassle," Dunn said. "People don't like to do it."
The ETFs will track the Bloomberg Commodity Indices (BCOM), a family of liquid and diversified indices giving investors access to global commodities. "Bloomberg is by far the 'benchmark of choice' within the commodity space. It is the most diversified basket of commodities that are out there," Dunn said.
BCOM covers 22 commodity contracts whose weightings are based on their liquidity, production value and economic significance. The benchmark sets a cap on sector exposure at 33%, meaning the allocation to energy is less than that of other indexes, creating a more diversified investor experience.
ProShares Launches 3x and -3x Crude Oil ETFs
ProShares launched daily 3x leveraged and inverse crude oil ETFs. ProShares UltraPro 3x Crude Oil ETF (OILU) and ProShares UltraPro 3x Short Crude Oil ETF (OILD) are benchmarked to the Bloomberg WTI Crude Oil SubindexSM. OILU and OILD are listed on NYSE Arca.
