United States Commodity Funds (USCF), a US-based pioneer in commodity-focused ETFs, has announced the launch of the United States Metals Index Fund (USMI), an NYSE-listed ETF providing optimised exposure to a diversified portfolio of metals futures contracts.
The United States Metals Index Fund (USMI) provides exposure to a fully collateralised portfolio of metals futures contracts.
USMI is designed to track the price movements of the SummerHaven Dynamic Metals Index Total Return and is the twelfth ETF in the USCF range, which has some $2.7bn in assets under management.
This SummerHaven Dynamic Metals Index has been specifically designed as a benchmark for investors seeking attractive risk-adjusted returns on a portfolio industrial and precious metals futures contracts.
The index is comprised of 10 metals futures contracts that are selected on a monthly basis based on quantitative formulas developed by SummerHaven Indexing. The underlying metals for these futures contracts are Primary Aluminium, Copper, Nickel, Zinc, Lead, Tin, Platinum, Silver, Palladium and Gold. The contracts are traded on major exchanges in the US and London
The relative weightings of the futures contracts for each of these metals will change on a monthly basis, so as to attempt to maximise the benefits from backwardation and minimise the drag caused by contango, while using contracts in the liquid portions of the futures curve. The index uses fundamental signals about underlying physical markets and the shape of the futures curves to assign index weights.
These futures contracts will be fully collateralised by cash, cash equivalents and US government obligations with remaining maturities of two years or less. The fund will be rebalanced monthly and comes with a Total Expense Ratio (TER) of 0.70%.
The launch of USMI, compliments USCF’s existing metals ETF, the United States Copper Index Fund (CPER), which launched on 15 November 2011 and focuses entirely on copper.
UK and European investors have a wealth of choice when it comes to commodity ETPs. ETF Securities, Deutsche Bank and Source all offer multiple ETPs focused on precious and industrial metals. However, none does exactly what USMI does – namely offer dynamically-optimised exposure to both precious and industrial metals in one single product.
In terms of roll-optimised metals products, UK/European investors are limited to the db Industrial Metals Booster ETC (XCT7) and the iShares S&P GSCI Dynamic Roll Industrial Metals Swap (SDRM). Either of these could then be blended with the S&P GSCI Precious Metals Total Return Treasury Bill Secured Source ETC (SPMETL) to achieve broadly the same exposure as USMI.