As the end of the year draws closer, tensions in Washington D.C. are starting to boil as gridlock may push us over the much-feared “fiscal cliff” and back into recession. Diminishing hopes that policymakers can strike a deal before the deadline has kept a lid on confidence while prices have remained fairly stable, which may be setting up stock markets for a disastrous open in 2013. Amid the mixed landscape, Toronto-based Sprott Asset Management rolled out a physical platinum and palladium fund on the NYSE [for more economic news and analysis subscribe to our free newsletter].
Sprott’s Physical Platinum and Palladium Trust (SPPP) marks another stride forward in the democratization of the commodity asset class. Investors should note, however, that amid the wave of ETF launches, Sprott’s offering is actually a closed-end fund. This means that SPFF can trade at a premium or a discount to its NAV for prolonged periods of time since the number of shares outstanding is static when compared to an ETF, which instead relies on the dynamic creation/redemption mechanism [see 3 Forgotten Ways To Play The Mining Industry].
SPPP comes with a 0.50% annual price tag, which is quite competitive considering that its closest ETF-counterparts both charge a steeper fee. Like other Sprott metals funds, SPPP boasts a redemption feature that allows investors to redeem their shares for physical platinum and palladium, a feature that some find incredibly appealing.
Ways To Play
Investors looking to gain exposure to platinum and palladium, but who wish to steer clear of futures contracts, may opt for two existing exchange-traded funds offered through ETF Securities:
- Physical Platinum Shares (PPLT): This ETF is designed to track the spot price of platinum bullion and charges 0.60% in annual expense fees.
- Physical Palladium Shares (PALL): This ETF is designed to track the spot price of palladium bullion and also features a price tag of 0.60%.
Disclosure: No positions at time of writing.