Leading ETF issuer, WisdomTree Investments, Inc. ( WETF ) forayed into commodity ETFs with the acquisition of GreenHaven Commodity Services, LLC or $11.75 million in cash. The transaction is expected to close in the fourth quarter of the year.The acquisition helped WisdomTree to get hold of two commodity-focused ETFs offered by GreenHaven. They include GreenHaven Continuous Commodity ETF ( GCC ), launched way back in 2008, and GreenHaven Coal ETF ( TONS ), launched in February this year.
According to WisdomTree CEO and President Jonathan Steinberg, the acquisition of these commodity ETFs highlights its “continued commitment to providing differentiated solutions in response to developments in the market and investor preferences.”
GCC tracks the Continuous Commodity Index-Total Return index giving exposure to 17 soft and hard commodities plus an additional Treasury Bill yield. The fund has amassed $245 million in its asset base (as of October 30, 2015) and trades in a moderate volume of 63,000 shares per day. It is quite expensive charging 85 bps in fees per year.
On the other hand, TONS is designed to track the daily price movements of coal futures. The product has only $1 million in AUM and trades in a paltry volume of nearly 2,000 shares per day. It is also expensive with 0.95% in expense ratio (read: Best and Worst Performing ETFs of September ).
Commodities may gain strength from the recent dip in the dollar due to the disappointing consumer spending data and downbeat Chinese factory surveys, but it could get back its lost strength once the lift-off talks return with full force. The Fed has already indicated a possible rate hike in December in its last meeting. A rising U.S. currency makes dollar-denominated assets more expensive to foreign investors, thereby dulling the appeal for the commodities (read: Inside the Continued Surge in Sugar ETFs ).
Further, supply glut, relentless economic turmoil in China (the world’s largest buyer of raw materials) and faltering global growth have been nagging concerns for the commodities this year. Notably, S&P GSCI Total Return – the benchmark for commodity market performance – nosedived about 19.9% so far this year (as of November 2, 2015) and has earned the disreputable epithet of the worst performing asset class this year.
If we look at the two acquired ETFs, GCC tumbled 13.8% in the year-to-date timeframe while TONS dropped 16.2% since its launch (as of November 2, 2015). Therefore, it would be worth while to see how the funds perform under the ownership of one of the dominant players in the ETF industry with a good track record of growth (read: Direxion to Close Down Three Leveraged ETFs ).
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