Greenhaven Commodity Services has filed papers with the Securities and Exchange Commission for the right to launch an ETF tied to the popular Reuters/CRB Commodity Index. The Atlanta-based firm said it would launch the ETF on the American Stock Exchange, charging 0.85% in annual fees. It will trade under the symbol GCC.
The CRB was the first and is still one of the best-known commodity indexes. The fund will track the CRB Index as it existed prior to a 2005 reformulation, when the benchmark was re-branded the Reuters/Jeffries CRB Index and underwent a major design overhaul. Prior to the overhaul, the CRB was an equally weighted index of 17 commodities. That distinguished it from competing indexes, which tend to weight components by their importance to the world economy or their liquidity on the financial markets. During the 2005 rebranding, the CRB adopted a new methodology that more closely mimics the S&P GSCI and DJ-AIG commodity indexes.
The "old CRB" -- now called the Continuous Commodity Index [CCI] - put a much smaller emphasis on energy and industrial metals—and a much larger emphasis on agricultural product—competing indexes. The table below breaks down the sector exposures of the major commodity indexes.
Not surprisingly, this huge variability in sector exposures has led to huge differences in returns. The table below compares the returns and standard deviations of the GSCI, DJ-AIG and CRB (data was not immediately available for the DBC Commodity Index).
Note that both the CRB's standard deviation and its annual returns are much lower, due in large part to its lower reliance on high-volatility (and historically high-returning) energy commodities.
With agricultural markets going great guns, the CRB has actually been performing well recently, and could attract the interests of investors looking for an agricultural tilt in their portfolios.
The full list of commodities included in the portfolio are Corn, Wheat, Soybeans, Live Cattle, Lean Hogs, Gold, Silver, Copper, Cocoa, Coffee, Sugar #11, Cotton, Orange Juice, Platinum, Crude Oil, Heating Oil and Natural Gas.
The Greenhaven ETF, like all commodity ETFs, will invest its collateral cash in Treasuries. Its returns will incorporate changes in the spot prices, income (or losses) from the roll yield on the various contracts and interest income from the collateral Treasuries cash.
The fund will charge 0.85% in annual expenses.
The prospectus is available here.
Written by Matthew Hougan
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