GraniteShares aims to be ETF industry disruptor

May 22nd, 2017 | By | Category: Commodities

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A new US-based ETF provider, GraniteShares, aims to disrupt the ETF industry by offering low-cost commodity ETFs with a smarter product structure. The firm officially launched this week with the listing of its first two ETFs on the New York Stock Exchange.

New ETF provider aims to be industry disruptor

William Rhind, founder and CEO, GraniteShares.

The new ETFs are the GraniteShares Bloomberg Commodity Broad Strategy No K-1 ETF (NYSE Arca: COMB) and the GraniteShares S&P GSCI Commodity Broad Strategy No K-1 ETF (NYSE Arca: COMG). The ETFs are structured as 40 Act funds and do not issue K-1s.

Schedule K-1s are distributed to shareholders of traditional commodity-based ETFs, but the GraniteShares ETFs have avoided this by investing in a wholly-owned subsidiary based in the Cayman Islands which then invests in the underlying commodity futures. By doing so, investors in COMB and COMG will be taxed like a conventional mutual fund and will receive Form 1099 rather than the less favoured K-1s.

COMB tracks the Bloomberg Commodity Index which gives exposure to a broad basket of commodity futures. The fund’s management fee is just 0.25% making it the cheapest ETF to offer exposure to a broad commodity index in the US.

COMB has 22 constituents, the largest of which are gold (12%), copper (8%) and natural gas (8%). Agriculture is the largest sector with 29%, followed by energy (29%), industrial metals (18%), precious metals (16%) and livestock (6%).

COMG replicates the performance of the S&P GSCI Index, which also gives investors exposure to a broad basket of commodity futures. The management fee of the fund is 0.35%.

COMG has 24 constituents, the largest of which are WTI Crude Oil (24%), Brent Crude (17%) and Gas Oil (5%). Energy is the dominant sector with 59%, followed by agriculture (17%), industrial metals (11%), livestock (8%) and precious metals (5%).

The team behind GraniteShares has over 50 years’ experience in the ETF industry. The firm was founded by William Rhind, formerly of iShares and ETF Securities, who is serving as CEO. Benoit Autier, formerly of ETF Securities, is head of products, while Kristen Winther, previously at MSCI and Horizons ETFs, is the director of product development and Jess Klearman, formerly at Rich Investment Solutions and Deutsche Bank, serves as the firm’s portfolio manager.

Rhind commented: “I’m thrilled to officially launch GraniteShares. It’s been an incredible effort by the team to get our company and funds ready for today. GraniteShares is the culmination of our collective experience in the ETF business so far and our dreams for what it can be in the future.

“With these new ETFs, COMB and COMG, we’re aiming to re-establish the benchmarks for commodity investing in the United States. We feel investors have been overpaying for commodity ETFs for too long. GraniteShares wants to change that. Investors can now access funds with benchmarks to the Bloomberg Commodity and S&P GSCI indexes.”

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