Market News iShares Plans New Commodities ETF |
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iShares, the world?€™s largest purveyor of ETFs, plans to market a futures-based commodities ETF designed to minimize contango and maximize backwardation?€"a follow-on to a first-generation fund it launched about five years ago that doesn?€™t target contango. The fund?€™s benchmark currently The proposed iShares Dow Jones-UBS Roll Select Commodity Index ETF will be based on the contango-killing Dow Jones-UBS Roll Select Commodity Index Total Return. iShares?€™ filing with the Securities and Exchange Commission didn?€™t disclose tickers or fees. iShares?€™ planned ETF is the latest in a growing field of contango-targeting broad-based commodities funds that includes the $5.6 billion PowerShares DB Commodity Tracking Index Fund (NYSEArca:DBC - News) and the $424 million United States Commodity Index Fund (NYSEArca:USCI - News). Contango occurs when near-term contracts are cheaper than those expiring later on, which cuts into returns when fund managers roll exposure when a contract expires. Backwardation is the opposite?€"when the soonest-to-expire contract is the priciest, which creates a tail wind for a fund manager who maintains exposure by rolling into one that?€™s cheaper than the one that?€™s expiring. The iShares fund will own long positions in ?€œcommodity excess return futures?€ contracts, called CERFs, on the Dow Jones UBS Roll Select Commodity Index, together with cash and short-term securities used to collateralize the long position, the company said in the filing. iShares?€™ first broad, futures-based commodities ETF, the iShares GSCI Commodity-Indexed Trust (NYSEArca:GSG - News) came to market in July 2006. It has $1.32 billion in assets. Commodities In The Fund The prospectus said the index represents the return on a fully collateralized investment in the ?€œDJ-UBS Roll Select CI?€?€"before payment of the trust?€™s expenses and liabilities. The DJ-UBS CI is a benchmark index composed of futures contracts on physical commodities, the selection and weighting of which are currently determined based on the five-year average of the trading volume, adjusted by the historic dollar value of the futures contract being considered for inclusion in the index. The benchmark also considers the five-year average of production figures, adjusted by the historic dollar value of the related futures contracts, for the underlying commodities. The 23 commodities currently eligible for inclusion in the DJ-UBS CI are:
Four of the above commodities?€"cocoa, lead, platinum and tin?€"are eligible but aren?€™t currently represented in the DJ-UBS CI, the prospectus said. The iShares filing comes just days after Paris-based bank BNP Paribas filed similar paperwork to market its own version of an optimized rolling commodities futures ETF. Permalink | ' Copyright 2011 IndexUniverse LLC. All rights reserved More From IndexUniverse.com
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