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ETF Securities Launches First ETC Ex-Agriculture And Livestock

Written by Rebecca Hampson

  
November 29, 2012 17:28 (CET)

London-based exchange traded commodity provider ETF Securities has launched the first Exchange Traded Commodity, excluding agriculture and livestock.

The ETC, traded on Xetra, gives investors exposure to components from the DJ-UBS Commodity Index without agriculture or livestock stocks, investing in which has caused much ethical debate because of the impact on food prices.

The ETC will track the Dow Jones UBS ex-agriculture and livestock sub index and will also give investors a collateral return. The index has 11 components compared to the usual 20 found in the DJ-UBS Commodity Index, with energy remaining the largest sector followed by industrial metals and then precious metals.

According to Isabell Mossler, co-head of Emea sales at ETF Securities, the ETC is a solution for investors who want to avoid these two sectors. Previously they would have invested in the ETFS All Commodities DJ-UBSCI and then shorted the agriculture and livestock.

“We have launched this new product on the back of client feedback and demand, driven by the ethical debate surrounding investing in food, which includes agriculture and livestock,” Mossler said.

“However, it is about providing a choice of products since other clients are actively looking to gain agricultural exposure, a commodity sub-segment with anti-cyclical characteristics which has performed well this year with returns of around 7 percent from the DJ UBSCI index.”

In July this year the price of corn rallied to a record high of $8.38 a bushel on the Chicago Board of Trade as droughts in southern US states threatened crops.

The ETC has a management fee of 0.49 percent and is backed by fully funded swaps with counterparties whose payment obligations are backed by collateral, which is marked to market daily.

The collateral is held in pledge accounts at The Bank of New York Mellon.

The monthly trading Xetra volume of ETCs averages around €700 million.

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