ETF Securities' New Silver Trust Is a Raging Success

Includes: SIVR, SLV
by: Michael Johnston

It’s been quite a week for the folks at ETF Securities (ETFS), one of the preeminent ETF sponsors in Europe that recently made the long jump across the pond to enter into the U.S. market.

Last Friday ETFS launched its Silver Trust (NYSEARCA:SIVR), a bullion-backed trust that is expected to compete directly with iShares’ SLV, and the company rang the bell on the NYSE on Tuesday. Most new ETPs struggle to gain their footing coming out of the gate, but SIVR has had no problems establishing sufficient liquidity right from the get-go.

ETFS rang the bell on the NYSE on Tuesday, and SIVR proceeded to trade nearly 250,000 shares that day. Volume was again above 200,000 on Wednesday and the fund’s average daily volume over its first five trading days topped 120,000. Typically, new ETFs take months to establish the level of liquidity that SIVR has managed to generate in only a few days.

While SIVR remains significantly smaller than its main rival (SLV has a market cap of about $3.8 billion and a three month average volume of nearly 9 million shares), its first week performance indicates that the fund (and its issuer) likely have a bright future ahead.

A look at the average daily trading volumes for several recently-launched ETFs over their first five days:

Differentiating a Commodity

Since SIVR is a passively managed fund that seeks to track the performance of silver bullion, there are only so many ways in which ETFS is able to differentiate its offering from SLV (as well as a few other silver ETFs on the market such as PowerShares DBS).

But they’re doing their best to make their fund stand out:

  • Expense Ratio: SIVR is currently offering an expense ratio of 0.30%, well below the 50 basis points charged by the iShares and PowerShares silver ETFs. The expense ratio is capped at this level until July 24, 2010, at which point it will rise to 0.45%.
  • Enhanced Transparency: ETFs have become so popular in part because of the increased transparency they offer relative to mutual funds. ETFS is taking the idea of transparency to another level, listing the bar numbers of the fund’s silver bullion on its web site.
  • Commodity Expertise: Although ETFS has a complete line of funds in Europe (including traditional equity and leveraged ETFs), the company’s expertise is in commodities. ETFS developed the first gold ETF in London and Australia in 2003 and in 2005 launched the world’s first oil exchange-traded commodity. “ETF Securities is a proven leader in the exchange-traded commodity industry in Europe, with a full line of product offerings and a dedicated research team,” says Fred Jheon, Head of Product for ETFS Marketing LLC.

Given the success of ETFS’ initial U.S.-listed fund, don’t be surprised if we see more commodity funds introduced soon.

Disclosure: No positions at time of writing.