Source launches enhanced roll-optimised Brent crude oil ETC (BOIL)

May 8th, 2012 | By | Category: Commodities

Source, a UK-based provider of exchange-traded products (ETPs), has announced the launch of the Source Brent Crude Enhanced T-ETC (BOIL).

Source launches enhanced 'roll-optimised' Brent Crude oil ETC

Dynamic rolling rules mitigate the potential effects of contango (negative roll yield) and thereby improve BOIL's ability to track the spot price performance of Brent Crude oil.

The exchange-traded certificate (ETC) offers optimised exposure to Brent crude oil via the S&P GSCI Brent Crude Enhanced Total Return Index and complements the firm’s existing Source Crude Oil Enhanced T-ETC (SEWTI), which provides optimised exposure to West Texas Intermediate (WTI) crude oil.

Historically, WTI light sweet crude was the major global benchmark for the oil market. However, Brent crude is increasingly recognised as a distinct and important benchmark, particularly since 2011, when it consistently traded at a premium to WTI.

“Political situations, oil inventories and infrastructure issues on the two sides of the Atlantic can be starkly different,” commented Source CEO Ted Hood. “Investors increasingly want exposure to a specific oil contract – Brent or WTI – rather than generic crude oil exposure.”

Both BOIL and SEWTI offer optimised exposure via indices from the S&P GSCI Enhanced Index series, which use dynamic rolling rules to mitigate the potential effects of contango and thereby improve the ability to track spot price performance (contango is when prices for longer-term futures contracts exceed prices for shorter-term contracts and spot prices, thus creating a negative yield, or drag, when contracts are rolled).

Conventional commodity indices, which take exposure via near-term futures contracts, can significantly lag spot prices in times of contango. The S&P GSCI Enhanced Indices aim to minimise this lag: when the market is in contango, the indices switch into longer-term futures contracts, where the effect of contango is typically less pronounced.

The Source Brent Crude Enhanced T-ETC is secured with US Treasury Bills and cash. It is listed on the SIX Swiss Exchange and trades in US dollars. It is registered for sale in Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy (for institutional investors only), Luxembourg, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the United Kingdom.

The product is UCITS III compliant, has UK Reporting Status, and is eligible for ISAs and SIPPs

Product Name Source Brent Crude Enhanced T-ETC
ISIN XS0766094972
Bloomberg Ticker BOIL SW
Base/trading currency USD / USD
Management fee 0.49% per annum
Listing SIX Swiss Exchange
Benchmark S&P GSCI Brent Crude Enhanced Total Return
Benchmark Bloomberg Ticker SGECBRTR <Index>
Domicile Ireland

Similar products include:

db Brent Crude Oil Booster ETC (XCTO  /  XCTL)
The db Brent Crude Oil Booster ETC provides exposure to the db Brent Crude Oil Booster USD Index with inbuilt roll optimisation (‘Booster’) to minimise the costs in contango and maximise the benefits in backwardation of rolling futures contracts.  Tickers: XCTO (LSE listed, GBP traded and hedged); XCTL (Xetra, EUR).

ETFS Brent Crude ETC (BRNT)
The ETFS Brent Crude ETC is designed to enable investors to gain an exposure to a total return investment in Brent Crude Oil futures by tracking the DJ-UBS Brent Crude Sub-Index plus a collateral return Ticker: BRNT (LSE listed).

UBS CMCI Brent Crude Oil ETC (LCOU)
The CMCI Brent Crude Oil ETC provides exposure to the UBS Bloomberg CMCI (CMCI) Brent Crude Oil Total Return Index. CMCI Brent Crude Oil measures the collateralised returns from a basket of Brent Crude Oil futures contracts and is representative of the entire liquid forward curve. Ticker: LCOU (LSE listed).

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