Thanks to increased worries over the fiscal health in a variety of developed markets, many investors have sought to protect their portfolios from declining fiat currencies by buying up commodities. In response, a host of ETF issuers have created a variety of new products allowing investors to establish exposure to precious metals, including both commodity-specific funds and physically-backed products offering exposure to multiple precious metals.
This basket approach to precious metal investing has taken off in recent weeks as investors have embraced the ETFS Physical PM Basket Shares (NYSEARCA:GLTR), which debuted in late October and has already amassed more than $130 million in assets. The fund allows investors to achieve exposure to all four metals (gold, silver, platinum, and palladium) in a single ticker, the first of its kind for a physically-backed product. ETF Securities has now introduced its second U.S.-listed precious metals basket product, rolling out the ETFS White Metals Basket Trust (NYSEARCA:WITE) on Friday.
The new fund from ETFS will invest in only the ‘white’ precious metals of silver, so WITE could have appeal for investors looking to hedge against inflation and a drop in the greenback but worried that gold is in a bubble or cautious since the yellow metal is difficult to value. The fund could also be a hit among investors who have already established exposure to gold–the metal has over $60 billion in ETF assets alone–but are looking to round out their exposure. Unlike gold, each of the white precious metals are used in industrial applications. Platinum and palladium are key components of catalytic converters for automobiles, while silver is used in everything from solar panels to dentistry applications.
“WITE provides our investors with a cost-effective, one-ticker solution towards exposure into silver, platinum and palladium and offers a great complement to portfolios with existing gold and precious metals positions,” said Fred Jheon, Head of Product and Business Development of ETFS Marketing LLC. “The new White Metals Basket ETF was developed in response to wealth managers looking to diversify beyond just gold holdings.”
Each share of the fund will initially offer exposure to one ounce of silver, 0.01 ounces of platinum and .008 ounces of palladium. This weighting system has the effect of pushing the fund heavily towards silver (approximately 55% at current market prices), with platinum making up the second biggest holding (33%), followed by palladium (12%). Interestingly, the actual metals will not be held together in the same vault; silver will be held in London while palladium and platinum will either be housed in London or Zurich. Much like the other ETF Securities products, WITE’s holdings will also be inspected biannually by an independent metal assayer while the bar numbers held by the trust will be published on a daily basis, giving investors greater peace of mind regarding their holdings.
WITE becomes the sixth U.S.-listed product for ETF Securities, which is also a major player in ETF markets in Europe. In addition to the two basket products now available, ETFS offers funds focusing exclusively on each of the four precious metals. The company’s gold fund (NYSEARCA:SGOL), which distinguishes itself from similar products from State Street and iShares by storing bullion in Switzerland, currently has more than $1 billion in assets. In total, ETFS has about $3 billion in U.S.-listed ETF assets.
WITE will charge an expense ratio of 0.60%; the average for the Precious Metals ETFdb Category is 0.53%, with IAU being the cheapest option at just 25 basis points.
Disclosure: Eric is long IAU, gold, and silver.
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