Saturday, September 02, 2006

Plethora of new commodity ETFs

The London Stock Exchange will soon be a home to a new group of commodity tracker funds.

29 Exchange Traded Commodities (ETCs) will be listed on the LSE within weeks according to a report in the Times Online.

The new instruments will be sponsored by Graham Tuckwell's ETF Securities, a firm that had already launched ETCs representing the price of oil and gold.

19 individual commodities, from nickel to cotton, will be represented with their own ETC, along with ETCs for 10 commodity groups tracked by Dow Jones-AIG. A detailed list of ETCs planned for listing can be can be seen in this HedgeWeek article.

Exchange Traded Commodities are simply a variation on the Exchange Traded Fund, or ETF. They are both traded throughout the day on a financial exchange, and are structured to offer investors a cost-efficient alternative to conventional mutual funds.

But while ETFs typically represent a share index or an industry group comprised of publicly traded companies, ETCs track the price of a specific commodity or commodity index group. Now anyone can make a directional bet on commodity prices without having to enter the futures market.

It looks like it will now be easier for new money to hop aboard this commodity bull market.