The world of commodity investing was cracked wide open by the introduction of exchange traded funds. ETFs democratized an asset class that was once reserved for active traders who understood the nuances of direct futures and options investing, leaving many on the sidelines. But now that the commodity ETF world has taken off, investors of all levels have the opportunity to play these hard assets like never before. What’s more, the commodity ETF universe is still expanding, bringing new options for investors to make a play. Below, we outline three interesting commodity funds that have been filed for, but have yet to launch [for more commodity ETF news and analysis subscribe to our free newsletter].
- Merk Gold Trust (OUNZ): This has quickly become one of the most highly anticipated ETFs in years as it will shake up gold investing as we know it. Currently, GLD and IAU are the two most popular gold products, as investors enjoy the physical exposure offered. But for all of their glory, many investors have trust issues with these funds and even some colorful conspiracy theories. Most of the issue comes down to whether or not these funds actually hold the gold they claim to have. OUNZ will eliminate this issue, as it will allow for easier physical redemption. “According to the prospectus, investors will be able, through a broker, to apply to redeem their shares for gold bullion. Those looking to redeem will have a choice in how they receive their gold: Merk Investments plans to offer a variety of bars and coins as redeemable assets” writes Devin Riley.
- Zacks MLP ETF (ZMLP): This ETF will seek to replicate the price and yield performance of the Zacks MLP Index and will charge 0.75% in annual expense fees. The underlying index is comprised of 25 to 50 stocks selected from a universe of master limited partnerships (MLPs) listed on domestic exchanges. The filing also mentioned that this ETF will make equal allocations to each of the underlying holdings, making it the only MLP ETF on the market with an equal weighted strategy. This may appeal to a number of investor who are frustrated with a select few companies receiving heavy weights in current MLP funds. The only question is how ZMLP will perform given the fact that there are already a fair amount of similar products [see also 25 Ways To Invest In Natural Gas].
- First Trust Global Agriculture AlphaDEX Fund: First Trust is looking to build off of its already successful AlphaDEX strategy with this new commodity product. The AlphaDEX methodology picks stocks based on book value to price, cash flow to price and return on assets. From these rankings, the bottom 25% of stocks are cut out, while the top 75% are included in the benchmark. Those with the highest scores get the biggest weightings, while the lower scores receive a smaller allocation. This proposed ETF will invest in international agriculture stocks, but will have stiff competition with the likes of MOO already secure in the portfolios of a number of investors.
Disclosure: No positions at time of writing.