Bumper crop play would be Horizons BetaPro DJ-AIGSM Agricultural Grains Bear Plus ETF (TSX:HAD)
I've not done any DD on this idea--I know the drought
is probably over in Australia (La Nina) however for all
I know the floods have been even more problematic. I
know very little about this, just throwing it out there
for fun. It is easy to imagine that grain prices are as
high now as they are going to get and this latest bubble
pops by Northern Hemisphere harvest. Do your own DD.
What would be fun, is to just watch the ag commodities
through the summer and do some paper trading.
....................
Commodities With Extra Bite
Written by Murray Coleman
Thursday, 17 January 2008 16:35
Four commodity funds started trading Thursday on the Toronto Stock Exchange, introducing the world's first leveraged and inverse exchange-traded funds (ETFs) dealing with gas and crude oil.
BetaPro Management Inc., one of three ETF providers in Canada, says it also plans to offer six more next week. That would expand their leveraged and short commodities ETF lineup into gold as well as agricultural and mining companies.
"We won't launch ETFs in the U.S. since we've got a business relationship with ProShares, which is based outside Washington, D.C.," said Howard Atkinson, president of BetaPro Management.
ProShares serves as subadvisor on all of the Toronto-based asset manager's ETFs. With their most recent launch, BetaPro now has 12 ETFs trading in Canada. Four more are due to open Jan. 23 and two more after that on Jan. 30.
ProShares has filed to launch more than a dozen leveraged and inverse commodity-related ETFs in the U.S.
But do investors need an ability to short and add leverage to an already volatile asset class?
The advantage these new ETFs offer on the leverage side isn't just to get more bang for your buck, so to speak. They also could provide investors that have more compact portfolios a bit more room to diversify. That's due to the fact they're designed to leverage and short markets by twice their underlying benchmarks' daily performance.
"You don't have to be fully exposed to commodities using these ETFs," Atkinson said. "A person could use half the capital through our ETF, freeing up more capital to be used in other asset classes."
That's what institutional money managers have been doing for a decade, he added. "But they've been using futures contracts," Atkinson said. "Now, ordinary investors without access to futures markets can increase their opportunities to diversify even more."
The short ETFs, like the leveraged ones, will give shareholders 2-1 exposure to commodities.
For example, the Horizons BetaPro NYMEX Natural Gas Bear Plus ETF (TSX:HND) tracks futures contracts for natural gas. An important trait is that HND and all of the new BetaPro commodities ETFs will deal with so-called nearby futures contracts. Those are futures orders closest to expiration, which are typically 30 days or less. Those are considered the most liquid types of commodities contracts.
The new ETFs will also trade in Canadian dollars. "But we'll actually hedge the Canadian dollar exposure to the U.S. dollar," Atkinson said. "The result will be that investors will get their performance in U.S. dollar terms."
Also launching on Thursday were:
Horizons BetaPro NYMEX Natural Gas Bull Plus ETF (TSX:HNU)
Horizons BetaPro NYMEX Crude Oil Bull Plus ETF (TSX:HOU)
Horizons BetaPro NYMEX Crude Oil Bear Plus ETF (TXD:HOD)
Later in January, the following are scheduled for release:
Horizons BetaPro COMEX® Gold Bullion Bull Plus ETF (TSX:HBU)
Horizons BetaPro COMEX® Gold Bullion Bear Plus ETF (TSX:HBD)
Horizons BetaPro S&P/TSX Global Mining® Bull Plus ETF (TSX:HMU)
Horizons BetaPro S&P/TSX Global Mining® Bear Plus ETF (TSX:HMD)
Horizons BetaPro DJ-AIGSM Agricultural Grains Bull Plus ETF (TSX:HAU)
Horizons BetaPro DJ-AIGSM Agricultural Grains Bear Plus ETF (TSX:HAD)
"These sound more appropriate for traders," said Robert DeHollander, an Ameriprise Financial advisor in Greenville, SC. "It's nothing we'd use for long-term investors."
He likes using commodities ETFs for high net worth clients. "We study asset classes a lot," DeHollander said. "Our feeling is that when you add in 5% increments to portfolios in things like REITs and commodities, it tends to reduce overall volatility and increase long-term returns."
Most of his portfolios now have up to 15% exposure to a mix of REITs and commodities. DeHollander primarily favors DBC, the PowerShares DB Commodity Index ETF (AMEX:DBC).
"The problem with these new commodity ETFs is that they're dividing up the market into such small niches," he added. "It gets very speculative. We stay away from making bets on moves in individual commodities, which is essentially what these ETFs will allow some people to do."
|
