WisdomTree Launches Two Enhanced Exchange-Traded Commodities (ETCs) on London Stock Exchange
Wednesday 27th February '19
London, 27 February 2019: WisdomTree, the exchange traded fund ("ETF") and exchange traded product ("ETP") sponsor, today announced the launch of two new enhanced exchanged-traded commodities (ETCs). The Boost Enhanced Industrial Metals ETC and the Boost Enhanced Energy ETC listed on the London Stock Exchange today.
Each of the new products incorporates a tried and tested optimised roll mechanism which aims to minimise the potential losses arising from commodity future contracts in contango or to maximise the benefit from contracts in backwardation.
Christopher Gannatti, Head of Research in Europe, said, “The roll in these ETCs substantially mitigates the costs of holding commodity futures contracts and this can potentially reduce the volatility of returns. This removes one of the main barriers to having a long-term allocation to commodities.”
“We have a constructive view on both industrial metals and energy, in particular oil. As a result of Organization for Petroleum Exporting Countries (OPEC) policy, oil supply is currently declining, helping to lift prices. Most industrial metals are in a supply deficit and we believe that once the fog of trade concerns lifts, metals will be able to trade on their own fundamentals and shake off the negative sentiment that has recently held down the asset class,” he continued.
Rafi Aviav, Head of Product Development, commented, “We are the leading provider of ETCs in Europe, with 31%1 market share. We are committed to providing comprehensive solutions for investors and these new products add even more breadth to our commodity offering. We have an existing smart beta approach to broad commodity investments, and we are delighted to extend this approach to individual sectors, ensuring investors can tailor their portfolio to suit their needs.”
The Boost Enhanced Industrial Metals ETC tracks the Optimised Roll Industrial Metals Total Return Index and the Boost Enhanced Energy ETC tracks the Optimised Roll Energy Total Return Index. Each index incorporates a smart roll mechanism, based on the S&P GSCI Dynamic Roll indices, that aims to deliver curve enhanced returns. The results of the enhanced roll strategy are evident from the consistently higher returns2 and lower risk relative to benchmark Bloomberg Commodity subindex (BCOM) returns.
Contango: Occurs when the current spot price of a commodity is lower than the forward price.
Backwardation: Occurs when the current spot price of a commodity is higher than the forward price.
Roll: Occurs when a futures contract is switched from the front month contract that is close to expiration to another contract in a further-out month.
S&P GSCI® Dynamic Rolling Methodology: An optimised roll mechanism which aims to minimise the potential losses arising from commodity future contracts in contango or to maximise the benefit from contracts in backwardation
Bloomberg Commodity Indices (BCOM): A family of financial benchmarks designed to provide liquid and diversified exposure to physical commodities via futures contracts.
Optimised Roll Industrial Metals Total Return Index: This adopts the same starting weights as the Bloomberg Industrial Metals subindex and then applies the S&P GSCI® Dynamic Rolling Methodology. It is comprised of Copper, Aluminium, Zinc and Nickel.
Optimised Roll Energy Total Return Index: This adopts the same starting weights as the Bloomberg Energy subindex and then applies the S&P GSCI® Dynamic Rolling Methodology. It is comprised of Crude oil, Brent Crude, Heating oil, Natural Gas, Gasoil and Gasoline.
TER: Total Expense Ratio
1 WisdomTree, Morningstar, 12/02/2019 - Commodity ex-Gold share.
2 WisdomTree, Bloomberg. Data from 31/01/02 to 31/12/18 and based on monthly returns. The Optimised Roll Industrial Metals Total Return Index and the Optimised Roll energy Total Return Index both started live calculation in October 2017 and the latest annual rebalance took place on 16 January 2019. Calculations are based on total return indices and include backtested data.