- World first for listed access to an entire platform of forward commodity indices via ETCs
- Response to strong demand for access to longer dated futures
- First listed products ever to track the Dow Jones-AIG Commodity 3 Month Forward Indices
Global pioneer in exchange traded commodities, ETF Securities (ETFS), will deliver another world first by listing twenty-nine new Exchange Traded Commodities (ETCs) on the London Stock Exchange in the next few weeks– offering investors, for the first time ever, the opportunity to gain direct and simple exposure to commodity futures prices which are linked to the Dow Jones-AIG Commodity 3 Month Forward Indices.
The new ETCs will track 29 different individual commodities and baskets of commodities with two different maturities available. In total, there will be up to 58 ETCs available, tracking both the Dow Jones-AIG Commodity IndexSM and the DJ-AIGCI 3 Month Forward Indices which are being launched by Dow Jones and AIG Financial Products Corp. for the very first time.
The first ETCs to track DJ-AIG Commodity Indices were listed on the London Stock Exchange in September 2006. Since then, the existing 29 ETCs tracking DJ-AIG Commodity Indices have accumulated over $1 billion in assets. The most popular ETCs have been those tracking precious metals and agriculture, which contribute 70% of ETC assets and track the existing DJ-AIG Commodity Indices. Over the past twelve months, the ETCs have been listed on five European stock exchanges including London Stock Exchange, Deutsche Borse, Euronext Paris, Euronext Amsterdam and Borsa Italiana.
Substantial demand from investors for more choice to different parts of the commodity futures curve has led ETF Securities to create these new forward ETCs, providing investors with more choice and allowing investors to implement different investment strategies in commodities. The demand for new ETCs is a result of significant investor interest in commodities and increased knowledge about commodities investing. The new forward ETCs have historically shown lower volatility while the effects of contango and backwardation also vary between the existing and new ETCs.
Demand for these new ETCs has been driven by investors searching for a means to expose their portfolio to the benefits of backwardation* which can provide a source of return in addition to the commodities price return. Due to the dynamic nature of backwardation and contango, investors wish to be able to track different commodity futures dependent on this feature.
First dealings in these securities is expected to commence on the London Stock Exchange in the next four weeks.
Commenting on launching another world first, Graham Tuckwell, Chairman of ETF Securities, said:
“ETCs have now been available in Europe since December 2003 and their simplicity and structure have now been embraced by the market. Many investors have approached us showing an appetite for ETCs priced off a range of commodities futures. Increased investor demand and knowledge has resulted in investors wanting access to more choice and alternative trading and investment strategies.
“Overall there has been a huge surge in global demand for ETCs and we recently passed the landmark of US $1.5 billion invested in our existing offering of 42 different ETCs. With listings on five of Europe’s major exchanges ETF Securities has successfully delivered simple, cost-efficient and accessible products for all investors.”
“With the new range of Forward ETCs, ETF Securities is continuing its leadership of the ETC market having previously delivered platforms of five physically backed precious metal ETCs, 8 oil ETCs backed by Shell and 29 commodity ETCs on 5 major stock exchanges.
* ‘Backwardation’ and ‘contango’ – definitions:
Backwardation refers to a downward sloping forward curve (as in an inverted yield curve) or, more formally, it is the situation where, and the amount by which, the price of a commodity for future delivery is lower than the spot price, or a far future delivery price lower than a nearer future delivery.
Contango is the opposite to ‘backwardation’ and refers to an upward sloping forward curve (as in the normal yield curve) in prices or, more formally, it is the situation where, and the amount by which, the price of a commodity for future delivery is higher than the spot price, or a far future delivery price higher than a nearer future delivery.
