ETF Update: First 130/30 ETN, New Commodities Indexes

First 130/30 ETN Launches - Will It Take Off?

JP Morgan is the first to market with a first-of-its kind exchange traded note [ETN].

The First Trust Enhanced 130/30 Index (JFT) is a modified equal-weighted total return index that offers 130% long and 30% short exposure to large-caps. Growth factors are price appreciation over three-, six- and 12-month intervals. One-year sales growth is also a factor. First Trust is the developer of the note's underlying benchmark.

ProShares also has a similar fund in registration, in ETF form.

130/30 strategies are generally associated with hedge funds, reports Murray Coleman for Index Universe. In recent years, open-end mutual funds also have been putting the strategy to work. The goal in them is to get additional alpha and excess returns while netting 100% exposure to the market.

If the 130/30 strategy's popularity in other funds is any indication, they seem to have the potential to attract exchange traded product investors. Morgan Stanley says $100 billion worldwide is in 130/30 funds, reports Matthew Hougan for Index Universe.

Roger Nusbaum of Random Roger feels that this kind of fund would work best in mature bull markets, and might work better for a buy-and-hold portfolio.

Time will tell.

S&P Launches Commodities and Natural Resource Indexes, Perhaps ETFs For Them Will Follow

Standard & Poor's has launched two new indexes which may someday give ETF investors a benchmark with some more exposure to commodities and natural resources.

The S&P Global Natural Resources Index provides diversified and liquid exposure to the primary commodity sectors of energy, agribusiness, and metals and mining. ETF Express reports that each sector has two clusters: oil and coal; agriculture and livestock; and precious and industrial metals. The index gives exposure to the 60 largest companies across these clusters.

The S&P PMI Commodities and Resources Index provides a broader coverage of larger, capitalized stocks from the energy, agribusiness and metals and mining sectors.

Perhaps someday there will be an ETF product based on these indexes. Meanwhile, there are plenty of ways to gain exposure to the agriculture and commodities sectors, including:

• Unites States Natural Gas Fund (UNG): tracks natural gas futures; up 56.9% year-to-date
• PowerShares DB Energy Fund (DBE): holds crude oil, natural gas, heating oil; up 43.6% year-to-date
• PowerShares DB Base Metals fund (DBB): aluminum, copper, zinc; up 11.5% year-to-date
• iShares GSCI Commodity-Indexed Trust (GSG): natural resources; up 31.8% year-to-date