Considering the New Active Commodity ETFs

IndexUniverse reported yesterday that Delta Global Advisors filed for three actively managed ETFs.

Grail Advisors just launched an actively managed ETF with ticker GVT that broadly targets large cap value. You can read more about it here.

The Delta Global funds are much narrower. The three are

• Claymore Delta Global Infrastructure
• Claymore Delta Global Hard Assets
• Claymore Delta Global Agribusiness

Generally I don't use broad based funds, where I am not using individual stocks I prefer narrow based funds which makes it easier to create the specific portfolio effect I am looking for. Something like GVT is unlikely to appeal to me, but the type of funds listed above might. The problem with broad-based actively managed funds, regardless of whether you can see what they own today like you can with GVT, is that you have no idea what the fund will look like in the future. That makes integrating it into a diversified portfolio very difficult.

The Delta Global funds will always be proxies for some very narrow parts of the market. The agribusiness fund may or may not be a successful proxy for the ag stocks but it is always going to be invested in that space. Anyone who buys that fund can reasonably expect that they are adding materials and a lot of beta to the portfolio.

On to the funds themselves, or, more correctly, to what the filing says: The infrastructure fund will include utilities, ports, airports, roads, railroads, water infrastructure, telecom build-outs, engineers and basic materials. IndexUniverse concludes that of the several infra ETFs that already exist, the Detla Global fund will be most like the PowerShares Emerging Market Infrastructure Fund (PXR), but after looking under the hood of that one I would say that if the Delta fund does in fact regularly hold ports, roads and the like it would look more like the iShares Infra ETF (IGF) which I own for a few clients.

On the first run-through of the description of the hard assets fund, I thought it was saying it would own a combo of stocks related to hard assets and the actual commodities via exchange traded products, but after further review that appears not to be the case. This fund will focus on companies involved in gold, silver, platinum, palladium, copper, nickel, zinc, oil, nat gas, coal and uranium. That list could expand but no word what they think about thorium, bauxite or tantalum.

The global ag fund will own companies involved with ag commodities, seeds and related chemicals. IndexUniverse says this is similar to Market Vectors RVE Hard Assets ETF (HAP) and I would say the Market Vectors Agribusiness Fund (MOO) would be more like it because HAP has large positions in Exxon Mobil (XOM), Chevron (CVX) and BP.

As the funds have only been filed for, it is way too early to know whether they will be successful proxies or not. They may turn out to be so or maybe they can be paired with similar narrow based index funds for some sort of absolute trade -- hey, that could be an idea for the IndexIQ series of hedge fund ETFs if they ever list.

Disclosure: As a matter of disclosure, I write a daily post for (and am also a minority stakeholder in) a website which one way or another is related to Delta Global. I'm don't know the corporate structure nor do I participate financially in any investment product Delta Global is involved with and perhaps I don't even need to disclose any of this, I don't know.

Comments

[SoYouThinkY...:]

I am just not sure about using an actively managed commodity ETF. What is advantage of these funds over existing passive funds? You can create just about any type of commodity exposure without an active manager. I just put up an article about investing in commodities using the commodity ETFs and ETNs - check it out at soyouthinkyoucaninvest...

May 13 10:02 PM

[capt Brian:]

anything on an EFT covering platinum or palladium?

May 14 05:58 PM

[Roger Nusbaum:]

ETFSecurities filed for these, not sure when they will list


On May 14 05:58 PM capt Brian wrote:

> anything on an EFT covering platinum or palladium?

May 14 10:35 PM