ETF Securities, the global pioneer of exchange traded commodities (ETCs), has seen another successful launch of ETCs to the market with $155m garnered by the new ETCs in just eight weeks. Short and Leveraged ETCs have contributed to 15% of all net inflows across all ETCs. The reasons for the high demand for the new ETCs are a reflection of the current market conditions with volatile equity markets creating demand for non-correlated assets. Increased knowledge of commodities, combined with the increased ETC range of the new Short and Leveraged ETCs have also contributed to the increased demand from investors. Despite some volatility in the commodity markets and the credit crisis, ETCs have experienced $1,030m of net inflows over the past eight weeks.
Last week was a record week for Short and Leveraged ETCs, 11 Short ETCs experienced inflows of $20m, while 23 Leveraged ETCs experienced net inflows of $30m. The listing of Short ETCs and Leveraged ETCs has come at a time when investors are using different tools to access the commodity markets. With 66 new Short and Leveraged ETCs, investors now have greater choice to implement different investment strategies.
33 Short ETCs were listed on the 22nd February 2008 garnering $110m of assets. 80% of Short ETC assets have been invested in ETCs tracking individual commodities and 20% of Short ETC assets have been invested in ETCs tracking baskets of commodities. The most popular Short ETCs to date have been ETFS Short Crude Oil (SOIL), ETFS Short Gold (SBUL) and ETFS Short All Commodities (SALL). The top performing Short ETC since launch has been ETFS Short Coffee (SCFE) which is up approx 17% in eight weeks.
Short ETCs allow investors to earn a positive return even when the index is falling. Short ETCs earn minus one times (-1x) the daily change in the index (before fees and interest). For example, if the underlying index falls by 2% in a day, a Short ETC will increase by 2% and vice versa. Getting inverse exposure has previously involved shorting the ETC, covering with a stock borrow and buying back the ETC at a later date to realise the profit or loss. 'Short' ETCs have simplified this process and reduced the costs of shorting dramatically.
33 Leveraged ETCs were listed on 11th March 2008 garnering $45m of new assets, up 200% in the past week alone. 80% of Leveraged ETC assets have been invested in ETCs tracking individual commodities and 20% of Leveraged ETC assets have been invested in ETCs tracking baskets of commodities. The most popular Leveraged ETCs to date have been ETFS Leveraged Crude Oil (LOIL), ETFS Leveraged Gasoline (LGAS), ETFS Leveraged Heating Oil (LHEA) and ETFS Leveraged Gold (LBUL). Last week ETFS Leveraged Natural Gas (LNGA) had the highest return of 14.9% while the top performing Leveraged ETC since launch has been ETFS Leveraged Heating Oil (LHEA) up approx 28% in six weeks.
Leveraged ETCs allow investors to earn a positive return when the index is rising with 50% less capital. Leveraged ETCs earn two times (+2x) the daily change in the index (before fees and interest). For example, if the underlying index rises by 2% in a day, a Leveraged ETC will increase by 4% and vice versa. In today's market where it is increasingly difficult to obtain credit and margin, Leveraged ETCs free up additional capital for investors to gain additional portfolio diversification.
ETF Securities has signed 3 new market makers for the ETC platform. Banca IMI and Goldman Sachs have signed up as authorised participants and La Branche as a liquidity provider. They join the following world class companies who are already providing liquidity and continuous pricing for ETCs: Flow Traders, Nyenburgh, Susquehanna, Morgan Stanley, Barclays Capital, UBS, ABN Amro, HVB, HSBC, Merrill Lynch, Citigroup, Société Générale, Winterflood and JP Morgan. ETF Securities now has more authorised participants/liquidity providers than any other ETF/ ETC issuer in Europe. This in turn offers superior liquidity to investors who use ETCs to gain commodity exposures. Investors can buy and sell the new ETCs through regulated brokers or approved market makers. ETCs can be traded with all the same order types available to equities, including market, limit and stop orders.
ETF Securities now has the most complete and successful ETC platform globally. The ETC platform includes physically backed precious metal ETCs, as well as Long, Forward, Short and Leveraged ETCs providing exposure to indices tracking energy, agriculture, livestock, industrial metals and precious metals futures markets. Over the past eight weeks, the two most popular ETCs were ETFS Physical Gold (PHAU) and ETFS Agriculture (AIGA). PHAU experienced $310 million of net inflows, reaching $1 billion in total assets while AIGA experienced $210 million of net inflows, reaching $960 million in total assets. The ETCs are listed in dedicated ETC trading segments on the five major European stock exchanges.
Commenting on the success of the new range of ETCs, Nik Bienkowski, Chief Operating Officer, said:
"The rationale to launch the platform of Short and Leveraged ETCs is twofold. Firstly, it provides the most complete access to commodities and allows more trading strategies for a broader investor base. This has allowed investors to enjoy impressive returns resulting from unprecedented global demand for commodities. Secondly, we wanted to offer investors exposure to a broad range of commodities which have historically been extremely difficult to access. Investors appreciate the key features of ETCs including liquidity, transparency and cost efficiency. This has led to our assets growing by over 100% since the start of this year to $5.4 billion.
"Over the past eight weeks the huge surge in global demand for ETCs has continued. The new 66 Short and Leveraged ETCs have garnered $155m assets in eight weeks which is extremely impressive. This growth is the fastest asset gathering we have experienced in any of our ETC launches to date, which has come as a result of the broad range of investment strategies one can implement now using Short, Leveraged and Long ETCs.
"We are pleased to welcome Banca IMI, Goldman Sachs and La Branche to join our panel of market makers of which we now have the largest panel of market makers compared to any ETF/ETC Issuer in Europe. As a result, weekly ETC trading volumes have exploded to over $800m in value and assets have increased by over 100% this year to over $5.4 billion.