U.S. Heating Oil Fund Launches
For anyone looking for another way to access oil markets, Victoria Bay Asset Management is marketing a fund that offers access to a specific segment.
The United States Heating Oil Fund (AMEX: UHN) tracks the changes in price of heating oil as measured by futures contracts traded on the New York Mercantile Exchange. It invests in so-called near-month contracts set to expire - except when the near-month contract is within two weeks of expiration, in which case it will invest in the next month. The fund spreads investments over a longer time frame than some other funds, aiming to lessen the impact of contango and related market forces.
Victoria Bay is registered as a commodity pool operator and has $1.1 billion in assets under management as of December 31, 2007. It already has funds covering three other important areas of the oil and energy markets – crude oil, natural gas and gasoline.
Investors in UHN will benefit from interest income as well. Like other commodities ETFs, the fund only needs to use a portion of the fund's available reserves to buy full futures positions. That leaves any excess cash free to invest in high-yielding yet secure fixed-income bonds such as longer-term Treasuries.
Read the prospectus for UHN here [pdf file - all links are for pdf files].
First NETS Cover U.K., Australia
The first two NETS (Northern Trust Exchange-Traded Shares) launched on Wednesday on the AMEX. In the coming months Northern Trust Global Investments, the asset management arm of Northern Trust, anticipates bringing at least 25 more ETFs to market.
The NETS FTSE 100 Index Fund (AMEX: LDN) tracks the FTSE 100, the most widely followed benchmark for the U.K. market. The index represents the 100 largest companies by market-cap size in the London Stock Exchange, roughly 80% of the LSE's market cap. Both funds will charge an expense ratio of 0.47%.
The NETS S&P/ASX 200 Index Fund (AMEX: AUS) launched at the same time. Both funds will go head to head with competing funds from the iShares family. However, the NETS family takes a slightly different approach to country investing than the iShares – Northern Trust has opted to use locally favored indexes in many cases, while iShares, the main existing provider of country-specific ETFs, tends to use MSCI’s country indexes, which are favored by institutional investors.
In the coming week, Northern Trust expects to launch additional ETFs covering Germany, Japan, France and Hong Kong.
New ELEMENTS Cover Commodities, Global Warming
April has been a busy month for the ELEMENTS platform. Within the first two weeks it has seen the launch of four new exchange-traded notes, all issued by Credit Suisse (rated AA-/Aa1). Three cover sections of the commodities market, while the third offers exposure to the industry that has arisen around efforts to combat and deal with global warming.
The three new commodities ETNs track indexes from Merrill Lynch marketed under the MLCX brand that cover livestock, precious metals and gold. The MLCX (Merrill Lynch Commodity index eXtra) is an index of 18 different commodities; the contracts are selected based on liquidity and weighted according to their importance in the global economy, according to Merrill. The index's methodology rolls each component into the next available contract month during a 15-day period in the month prior to the original contract's expiration month. Meaning, if the contract was expiring in June, the rolling process would take place in May.
The MLCX Precious Metals ELEMENTS ETN (NYSE: PMY) covers gold (52%), silver (32%), platinum (8%) and palladium (8%). The MLCX Livestock ELEMENTS ETN (AMEX: LSO) tracks futures contracts in lean hogs (30%) and live cattle (70%). The MLCX Gold ELEMENTS ETN (AMEX: GOE) invests only in gold futures contracts. Although PMY and LSO both charge annual expense ratios of 0.75%, GOE charges just 0.375%, making it one of the cheapest ETNs available.
The Global Warming ELEMENTS ETN (NYSE: GWO) is a unique product that tracks the Credit Suisse Global Warming Index, which covers 50 companies with business activities focused on reducing global warming, such as the production of alternative energy and energy efficiency solutions.
UBS Enters ETN Market
Swiss-based financial services giant UBS entered the exchange-traded notes market last week, launching eight commodities and energy index-based portfolios to join a growing field.
All are listed on the NYSE Arca and marketed as E-TRACS. In terms of the makeup and construction of each new ETN's underlying index, at least in theory, they should provide a more blended approach to commodities investing by tracking contracts with different maturities. Each ETN tracks track the performance of the UBS Bloomberg Constant Maturity Commodity Index [CMCI] - which UBS says is the first benchmark commodity index to diversify across both commodities and maturities - or one of its subindexes.
The UBS ETNs trade under the following ticker symbols: CMCI Index (NYSEARCA:UCI), CMCI Agriculture Index (NYSEARCA:UAG), CMCI Livestock Index (NYSEARCA:UBC), CMCI Industrial Metals Index (NYSEARCA:UBM), CMCI Food Index (NYSEARCA:FUD), CMCI Energy Index (NYSEARCA:UBN), CMCI Gold Index (UBZ) and CMCI Silver Index (NYSEARCA:USV). UBZ charges 0.30%, while USV charges 0.40%. The rest of the ETNs charge 0.65%.
There were no new filings during the past week.