Can Active Commodity ETFs Catch On?

Claymore Securities is looking to expand and it has filed for three new actively managed commodity equity ETFs.

The new Claymore funds will be all equity-based, writes Lara Crigger for Hard Assets Investors. They will have 80% of their constituent stocks picked out by using traditional qualitative methods from Delta Global Advisors. Delta Global will pick companies with $400 million market cap or more, and use a “top-down approach to global markets and infrastructure-related sub-sectors” and a “bottom-up approach to individual companies.”

The challenge lies in the performance. Last year, 70% of all actively managed U.S. equity funds underperformed their benchmarks. These new funds may fare better with lower expense ratios and investors will be happy if the funds can provide the alpha. Investors may sit on the sidelines to see how they do first before jumping in.

The three newly filed actively managed commodity equity ETFs include:

Claymore Delta Global Infrastructure Fund. It will cover infrastructure and emerging markets by picking out companies involved in world construction, which includes miners, basic materials suppliers, utilities, telecoms, infrastructure engineers, water infrastructure, and road, rail, port and airport builders and operators.

Similar funds:

• SPDR FTSE/Macquarie Global Infra 100 (GII): down 8.5% year-to-date
• First Trust ISE Glb Engnrg And Const Idx (FLM): up 8.6% year-to-date
• PowerShares Emerg Mks Infrastructure (PXR): up 35.8% year-to-date
• iShares S&P Global Infrastructure Index (IGF): down 4.7% year-to-date

Claymore Delta Global Hard Assets Fund. Companies included will benefit through both the ups and downs in hard commodities prices, which includes mining, processing and selling hard commodities. Hard commodities include precious metals, base metals, energy and energy services.

Similar funds:

• iShares S&P North Amer Natural Resources (IGE): up 12.4% year-to-date
• Market Vectors RVE Hard Assets Prod ETF (HAP): up 20.8% year-to-date

Claymore Delta Global Agribusiness Fund. This will have companies that deal with growing, selling, processing or trading a agricultural commodities such as corn, soybeans, wheat, sugar, palm oil, cotton, oats and fruit. Biofuel companies may also be included.

The Claymore agribusiness fund will have to compete against the Market Vectors Agribusiness ETF (MOO), which is up 32.1% year-to-date.

If there are a actively managed commodity ETFs, then why not actively managed commodity futures funds? The ETN ELEMENTS S&P CTI ETN (LSC), currently down 9.7% year-to-date, takes the long and short positions in various commodity futures according to trends.

Max Chen contributed to this article.

Comments

[Alan Young:]

Equities are not commodities. Some equities are in companies that produce commodities, and TEND to correlate in price movement; but it's just wrong to call these "commodity ETFs."

May 27 05:19 PM

[Johnni:]

Yes Alan, this crucial point!
I certainly hope we will get more pure play ETFs based on futures where it is possible, and even more actively managed ETFs based on these.

What are the requirements for bringing an ETF to the market, could we see CTAs bring their funds to the ETF segment..?

May 28 04:58 AM

[RiskReturnO...:]

It would be great to get professional / active management involved in using commodity ETFs and create new managed commodity ETFs for passive retail investors.

As someone who's successfully invested in GLD, DBA, DBO, DBB, DBC, and SLV, its always go to have a "benchmark" from a professional firm, so that retail investors can choose between investing in individual commodity ETFs or just buying a "fund of fund".

May 30 05:51 PM