By Carolyn Pairitz
Two years ago, ETF Securities launched the first ever physically-backed precious metals ETF that focuses exclusively on silver, platinum and palladium. Since its inception in December 2010, WITE has accumulated just over $40 million in assets under management and trades on average over 3,000 shares daily. As the global market moves steadily into recovery, WITE remains a strong and moderately-priced portfolio for commodity investors.
Under The Hood
WITE is the only offering that offers bundled exposure to silver, platinum and palladium under one ticker. This one-of-a-kind offering is designed to reflect the performance of the prices of silver, platinum and palladium bullion through a portfolio that is comprised of physical exposure to each of the metals. From an allocation perspective, WITE dedicates about 60% of its total assets to silver, while platinum account for 30% and palladium fills in the last slot at 10%. JPMorgan Chase Bank is the custodian for the fund’s vaults, with the silver stored in London, while the platinum and palladium are either held in London or Zurich.
Physical Vs. Futures Exposure
Thanks to the rapid expansion of the exchange-traded universe, investors now have multiple tools to choose from when it comes to selecting the optimal commodity instrument for their portfolios, taking into account both relative needs as well as risk tolerance. For precious metals exposure, investors can opt for one of several futures-based or physically-backed products, while some may even choose to gain tangential exposure through commodity producers. Physically-backed products like WITE are designed to move in unison with the spot price of the underlying metals, while futures-based ETPs may deviate from changes in spot prices depending on the state of futures markets or yields available on excess cash. Futures-based exposure introduces several nuances and additional factors that impact bottom line performance: these products depend on the spot price of the metal, roll yield related to the slope of the futures curve and interest earned on non-invested cash.
Performance And Outlook
This has been a tumultuous year for precious metals. As investors see the economy recovering, they turn attentions back to equities and away from the safe haven of metals. WITE alone has lost five million in assets over the last years, and has been very clearly swayed by the performance of silver. Below, we outline WITE’s performance versus the iShares Silver Trust (SLV).
When considering the chart above, WITE and SLV have maintained a very close and rocky relationship over the year, with WITE usually staying just above SLV. It’s important to consider that WITE provides heavier exposure to silver than it does to platinum or palladium, so silver prices will have the biggest sway at the end of the day. Rising consumption of electronics, automobiles and jewelry across emerging markets, along with ongoing inflation fears, are two fundamental factors that paint a bullish investment case for the white metals, given their extensive industrial use and potential safe-haven appeal.
Disclosure: No positions at time of writing.