The First Trust ISE Global Copper (NASDAQ: CU) and First Trust ISE Global Platinum (NASDAQ: PLTM) give investors the first exposure to platinum and copper equities in an ETF form.

Until now, copper exposure was available in an exchange traded note (ETN) via iPath Dow Jones UBS Copper (NYSEArca: JJC) or as a component of the PowerShares DB Base Metals (NYSEArca: DBB), which is 40% copper futures. [Why Metals ETFs Are Leading the Charge.]

Platinum exposure is available through the popular ETFS Physical Platinum (NYSEArca: PPLT), as well as through ETNs such as UBS E-TRACS Long Platinum (NYSEArca: PTM), UBS E-TRACS Short Platinum (NYSEArca: PTD) and iPath DJ-UBS Platinum (NYSEArca: PGM).

Mark Abssy, index and ETF manager at ISE, says the indexes behind the copper and platinum funds were developed in 2008 as investor interest in the ISE and First Trust natural gas ETF, First Trust ISE-Revere Natural Gas (NYSEArca: FCG) was gaining momentum. Commodities were also becoming a part of more and more headlines, leading ISE to think about other commodities that might be of interest to investors. “We were thinking along those lines – what can we help investors get exposure to?” Abssy says. “The first two we came up with were platinum and copper.” [Platinum and Palladium Price Drivers.]

The market cap minimum of $75 million is admittedly low. The reason, Abssy says, is that when considering  mining stocks, there are a number of companies still in the exploration stage, but have yield estimates based on geological surveys. “Much of their valuation is tied to the value of the commodity,” he says. Those companies tend to be more sensitive to underlying commodity price action, offering more direct exposure to the underlying commodity than fully functioning mines. [Your Guide to Investing In Metals ETFs.]

In the copper fund, the country allocations are Canada, 42%; Great Britain, 22%; Peru, 9.3%; Australia, 7%. There are also holdings in Russia, Turkey and other areas. If you’re surprised that Chile isn’t on the list, there’s a reason for that. Abssy acknowledges that while Chile is a major copper producer, many of the names already held in the underlying index already have major properties in Chile. Also, many of the major Chilean miners are still privately held. [The Impact of Chile's Earthquake.]

“There are many cross-deals in the mining industry,” Abssy says. “You wouldn’t necessarily think that a tiny company is connected to a large one, but the industry is like a big extended family.”

The platinum country breakdown is South Africa, 29%; Canada, 25%, Great Britain 17%. Other countries appearing in smaller amounts include Australia, Russia and a few U.S. names.

The outlook for both the platinum and copper markets looks to be on the bullish side of things as the domestic and global economies recover even further:

• Auto demand might be tepid now, but it’s showing signs of reviving.
• Ryan Issakainen, an ETF strategist at First Trust, also points out that when you combine the rate of cars being scrapped to the rate of population growth, it’s potentially a formula for an increase in auto sales and production in the United States alone. Auto demand in emerging markets is also becoming more robust.
• There are also tightening emissions standards; platinum and palladium are key components of catalytic converters, and can’t be substituted with any other metal.
• There are trace amounts of platinum group metals (PGMs) found in smoke detectors, airbags, computer hard drives and they’re heavily used in the pharmaceutical and cancer research industries, as well.
• On the copper side, a Barclays study recently projected that by the end of 2015, 1.5 billion Chinese citizens would each be using 12 pounds of copper – “astronomical when you think about the relatively tight supplies of copper,” Issakainen says.
• Copper is also a major component in new buildings – it’s heavily used in wiring and pipes, two things any modern buildings can’t get by without. “Copper is used very heavily in the emerging markets buildup,” says Issakainen.

Both funds have an expense ratio of 0.70%.

For more stories about copper and platinum, visit our categories.

Claymore’s three new funds are:

• Wilshire 5000 Total Market Index (NYSEArca: WFVK): Tracks the Wilshire 5000, the only index that holds every single stock trading in the United States today. The expense ratio is 0.12%.
• Wilshire 4500 Completion Index (NYSEArca: WXSP): For investors who already have access to the S&P 500, this ETF gives exposure to the remainder of the market. The expense ratio is 0.18%.
• Wilshire U.S. Real Estate Investment Trust (NYSEArca: WREI): Tracks the Wilshire U.S. Real Estate Investment Rust Index, which launched in 1991. It provides pure exposure to the REIT marketplace and excludes other types of real estate securities. The expense ratio is 0.32%. [Homebuilders Surge Ahead.]

William Belden, Claymore’s managing director, says these new offerings help take Claymore’s product line in a new direction and expands on where the provider has already been. “We’re happy with what we’ve done, and we’ll continue to be opportunitistic,” but having more core offerings will help round out the product line and further appeal to advisors.

The indexes on which the ETFs are based are being called “pure and complete” – that is, indexes built to give pure exposure to various markets without artificial parameters in place.

Robert Waid, Wilshire’s managing director, said he sometimes refers to the Wilshire 5000 as a “third-generation” market index, following the Dow Jones Industrial Average and the S&P500. The index was born in 1974 after its creators looked at the S&P 500 and determined that a better measure of the market was needed.

To give a sense of how the technology has changed, in 1974 it took about 40 minutes to calculate the values of the securities in the index; today, it’s done in mere seconds.

The Wilshire 5000 is a cap-weighted index, meaning that the largest companies are weighted the heaviest. The only criteria a stock has to meet to be included in the index is to trade on a U.S. exchange. There are no cutoff points concerning size, trading volume or share value. There are no nods toward certain sectors, either. [More on Indexing Here.]

“We didn’t create these indexes to fit some marketing spiel or to be publicly traded; we created these indexes to serve as benchmarks” so people could see how they’re doing, as well as to get a sense of how the market is looking.

And 5000 may be in the name, but there aren’t necessarily 5000 stocks in the index. Waid says that when they were building the index in 1974, there were close to 5000 securities trading, so they rounded up and the name stuck as the number of stocks in the United States ballooned to 7,600 in 1998 and shrank down to 4,100 today. Companies are added monthly.

For more stories about new ETFs, visit our new ETF category.

Read the disclaimer, as Tom Lydon is a board member of Rydex|SGI.  Both Claymore and Rydex|SGIO are owned by Guggenheim Partners.

The Direxion Long/Short Global IPO Fund (NYSEArca: DXIIX) is a managed mactical fund that incorporates long/short, tactical strategies with exposure to alternative asset classes.

Direxion’s Marketing Director Andy O’Rourke points out that many investors may not be aware that, on a global level, the IPO market is growing. While the U.S. IPO market might be tepid, “If you look globally, it’s a much larger growth rate,” he says.

To put it in perspective, in 2000, there were 386 new issues around the world. Following the burst of the dot-com bubble from 2001-2003, global IPO activity cratered to as few as 59 new offerings per year. But since then, O’Rourke says, it’s been steady growth. In 2009, global IPO activity topped 400 new issues.

O’Rourke says much of the IPO activity these days is taking place in areas like India and the Far East, nations populated by companies that are servicing other companies around the world (think: outsourcing).

On the long side of the fund are China, the United States, Brazil, Hong Kong and Canada. On the short side is also China, the United States and Hong Kong, with Japan and Germany taking the fourth and fifth spots. Direxion looks at each issue individually. [Increased IPO activity? There's an ETF for That.]

The idea behind the fund is the expectation that new issues will outperform in their first year of existence, then underperform in their second to fourth years. After the fourth year, the issue is dropped from the fund. “Looking at the price activity, you do tend to see the pattern of behavior,” O’Rourke notes.

The fund will also use short-selling to reduce overall risk associated with the IPO market.

DXIIX is subadvised by IPOX Schuster, which also provides the underlying index for another IPO ETF, the First Trust IPO Index (NYSEArca: FPX). FPX focuses on U.S. IPO activity. [How the Fund Works.]

The fund will try to capture IPO activity in three stages of life:

• Initial offer under-pricing – IPOs are often priced below the market’s initial expectations.
• Year 1 over-performance – analysts reports for value measurement and exaggerated market expectations may generate high returns.
• Post year one under-performance – many companies struggle to live up to initial expectations.

Why might you be interested in the fund?

• The fund provides diversification through exposure to another asset class.
• It provides a potential hedge against adverse market conditions.
• IPOs are considered a non-correlating asset class.
• IPOs tend to issue cheaply, so they provide a “down” market protection for the first 12 months.
• Tactical management that provides returns through the three phases stated above.
• Exposure to broad, global IPO syndicates.

For more information on the IPO market, visit our IPO category.

Max Chen contributed to this article.

The Brazil Infrastructure Fund (NYSEArca: BRXX) is a play on a slice out of a larger pie: the infrastructure improvements necessary to create and sustain growth in emerging markets. Unlike China, which has already long been working toward improving its infrastructure, Brazil by its own admission has not been giving the issue the attention it deserves. [All About the New China Infrastructure ETF.]

As a result, they’re far behind where they should be, says Richard Kang, Emerging Global Shares’ Chief Investment Officer and Director of Research. In fact, the vice president of Banco do Brasil SA said earlier this month that the country’s projects could require as much as $85 billion in financing over the next 10 years. [Watch Richard Kang's Fox Business Appearance on China.]

For investors, it’s all an opportunity. This is especially true as Brazil preps for two events that will have all the eyes of the world upon the country: the 2014 World Cup and the 2016 Summer Olympics. It’s estimated that World Cup-related projects could require as much as $54 billion in financing. [5 Reasons to Consider Brazil.]

In 2009, Kang visited South Africa, which is hosting the World Cup this year, and improvements to its infrastructure were already evident in the expansion of highways and airports. A similar situation could play out in Brazil as the World Cup and Summer Olympics loom closer.

Kang feels that infrastructure is potentially a long-term theme for investors. “You can’t think of that as a short-term holding, because you’re talking about the growth of a country over time.”

BRXX has 30 names with an average market cap of $11.7 billion. Components include metals and mining, telecom, utilities, water, power producers, transportation and machinery. The expense ratio is 0.85%.

For the latest news about new ETFs, visit our category.

The PowerShares CEF Income Composite Portfolio (NYSEArca: PCEF) is based on a recently created index from S-Network Global Indexes LLC, The S-Network Composite Closed-End Fund Index (Ticker: CEFX), which tracks the performance of yield-oriented, CEFs. The index holds 71 CEFs traded in the United States that range from $100 million to $2 billion in market capitalization, with expense ratios below 2%.

Owning a basket of CEFs has some clear benefits. “Most people who own CEFs don’t own enough, and you can get hurt by owning one that falls out of favor,” says Paul Mazzilli, senior advisor and member of the index committee at S-Network Global Indexes. PCEF is broadly diversified across a range of CEFs that hold a variety of debt types.

Twenty-seven of the CEFs held in the fund invest primarily in taxable, investment-grade fixed-income securities; 15 invest in high-yield fixed-income and 29 primarily use an equity option writing strategy. The fund issues monthly distributions and will rebalance quarterly. The yield on the ETF is currently above 8%.

Another issue with CEFs is that advisors lose a lot of time doing research, Mazzilli says. The advantage of an ETF that holds CEFs is that the managers will take care of that for investors.

CEFs have a set number of shares and do not issue more shares as demand grows. Prices are driven by demand, not the NAV.

Joesph LaCorte, President of S-Network, stated that “CEFX is the first index to track the performance of U.S. closed-end funds whose principal investment objectives are to produce taxable and tax advantage yields.”

According to Closed End Fund Index, the Index covers three main CEF sectors:

• Investment-Grade Fixed-Income. CEFs that invest in government securities, corporate bonds, agency bonds and foreign debt securities rated BBB or higher.
• High-Yield Fixed Income. CEFs that invest in corporate, emerging market debt and bank debt rated BBB or lower.
• Option Income. CEFs that invest in equities and write call options on equities and equity indexes.

For more information on new ETFs, visit our new ETF category.

Max Chen contributed to this article.

In the “old days,” investors and advisors analyzed mutual funds by looking at the managers: who they were, their track record, how well they had performed in recent months or years. In other words, the analysis was all focused on the past.

“When you’re looking at a mutual fund, you’re rating the manager of the fund. It’s important to look at past performance,” he says. Krause wants to move away from that.

Thanks to the transparency of exchange traded funds (ETFs), he believes there’s no reason to look anywhere but toward the future to make the smartest decisions for yourself or your clients.

Most ETFs passively track an index and thus lack a stock-picking manager. Krause explains the difference this way: If your fund manager had ridden the financial sector to the bottom, perhaps you’d have a case that the manager wasn’t earning his or her keep. But if the financial ETF sinks, it’s because the index sank, too. For that reason, it’s better to look at the holdings of the ETF to bring the big picture into focus.

“We’re leveraging the biggest benefit of ETFs, which is that they’re transparent,” he says. That transparency – the ability to see what any ETF holds at any given time – is used to evaluate stocks within each fund using fundamental criteria, such as sales, earnings, valuation multiples, to create an overall picture of the ETF. From there, an investor has the necessary information to determine whether that product is right for his or her portfolio.

The analysis ETF Research Center does doesn’t mean it runs a bunch of numbers that lead to a magical rating, but rather, “we are providing as much data and analysis as we can to enable financial advisors to make intelligent, informed decisions.”

Krause’s company runs numbers on 535 plain vanilla equity ETFs.

ETF Research Center’s service is aimed primarily at advisors because that market is primarily buying lots of ETFs for a wide variety of clients with varying goals. Access to the website costs $99 a month.

Visit the ETF Research Center for more information or to subscribe.

Advisors, institutions and retail investors have had certain long-held notions about ETFs and what determines liquidity that simply no longer hold true.

When you’re dealing in volume, buying and selling an ETF isn’t just a matter of finding a fund with all the qualities you desire – billions in assets, heavy trading volume, strong performance, low cost – and clicking “buy.” Attributes such as trading volume and assets used to be major considerations for investors because it tended to be that low activity in a fund led to wide spreads, bigger costs and, in a worst-case scenario, no one to buy the fund you’re holding when you’re in the market to sell it.

A Wider ETF Universe

The existence of people who facilitate the process of trading ETFs by providing a market for even the most thinly-traded fund is opening up new worlds for advisors and investors, making it possible for them to invest in ETFs that they once feared would be illiquid. [The 4 big benefits of ETFs.]

While what they do isn’t new – they’ve been around more or less as long as ETFs have –but there weren’t as many as there are now. And just like ETFs have made it possible for investors to access futures, currencies and far-flung global markets that previously were only open to institutions, alternate liquidity providers have expanded beyond institutional clients to registered investment advisors (RIA) and financial advisors. The services of liquidity providers give these advisors better access to price discovery and execution.

David Abner, director of institutional ETF sales and trading at WisdomTree, is one such person. After helping Bear Stearns build up their ETF trading business and making markets for institutional clients, he moved over to WisdomTree in 2008. The mission: help educate clients on how to trade ETFs from an issuer standpoint. The position at WisdomTree was created in response to a sharp uptick in ETF interest on the part of RIAs.

“What’s happening is that the client base is actually changing. ETFs are being picked up by registered investment advisors in droves, and these guys are primarily mutual fund investors,” Abner says. Abner is author of the forthcoming book, The ETF Handbook, which is scheduled to launch in March.

More Access for Advisors

Advisors may not have the same access to an institutional ETF desk, something WisdomTree found to be a growing issue. The job of Abner’s team is to hand-hold advisors through the process of the execution of a trade, although ETF providers don’t do any execution themselves.

“Advisors are starting to use ETFs and trading them in big sizes, not just little pieces.” This can lead to confusion – if advisors don’t know the volume or the spread on a fund, then two key pieces of information they need to trade large blocks are missing.

Abner defines large blocks of shares as anything above 5,000-10,000 shares. “It’s valuable to understand how to trade that kind of size in an ETF,” Abner says. “Because ETFs have this additional liquidity beyond the displayed trading volumes and you need to get people to access that liquidity for you.”

WallachBeth is an agency broker-dealer that sources liquidity by linking up institutional clients with an expansive liquidity network, who compete for the orders that cross their desk. The winner is the corresponding best bid or offer. The company’s ETF desk was formed out of a desire to quell growing advisor fear and misconceptions about certain ETFs.

“When advisors see light volume in the visible market, the environment as they know it is red-flagged to avoid it,” says Erik Ambrose, head of institutional sales at WallachBeth. That fear can cut down an advisor’s ETF options down from more than 800 to 400 or fewer.

Getting the Best Price

The ETF desk at WallachBeth is “100% dedicated to finding the best price that exists in an ETF security in the appropriate quantities, and delivering it in its raw form to the customer,” Ambrose says. “Our sole objective is getting the best price.”

Advisors until recently had very little access to the type of service that WallachBeth offers, which is part of the reason the company started its ETF desk. “It’s a game changer in the marketplace,” Ambrose says. In the ETF world, desks like WallachBeth’s help by making sure the market impact of large orders is kept to a minimum while also ensuring that advisors pay a fair price.

WallachBeth prides itself on its transparent pricing and reporting structure, as well as its deep bench of experienced traders. They have more than 25 traders with an average experience level of about 12 years.

What happens after you buy a thinly traded ETF and you want to sell it? “We always quote a two-way market,” says Andrew McOrmond, WallachBeth’s managing director. “We’re not taking the other side of the trade ourselves, so we have nothing to gain or lose by which direction the RIA chooses to go with an investment.”

Buyers, Sellers and Pricing

Paul Weisbruch, vice president of ETF and index sales at StreetOne Financial, agrees. “We’re agnostic as to whether we’re the buyer or the seller. I make it a point to tell people that the pricing of the ETF is not a function of whether there is a buyer or seller around in the ETF at that point in time, but rather a function of the dynamic liquidity of the underlying market.”

StreetOne Financial is another alternate liquidity provider that not only helps advisors get their trades executed efficiently, but they go the extra mile to work with RIAs and portfolio managers to assist them in finding the ETF that gives the exposure they’re seeking, as well as provide daily technical market commentary and actionable ETF trade ideas. [The point of diversification.]

Weisbruch says the firm’s goal is to be aligned with product issuers while making it feasible for everyone to use all the ETFs out there without losing basis points due to poor trade execution when buying or selling a position.

The point at which an alternate liquidity provider becomes involved is up to the advisor. RIAs and institutional clients can contact an ETF provider, who will guide them through the process, or the liquidity provider can be called directly. The liquidity provider will handle the trade from there, all the way down to delivering an ETF with average pricing. Alternately, the advisor’s custodian can call the liquidity provider and get the trade done that way. At the end of the day, Weisbruch says, “It shouldn’t cause you any more work operationally to get the trade done, and the benefits are better pricing and the recapture of basis points that otherwise would be lost in the marketplace.”

For more educational stories about ETFs, visit our ETF 101 category.

Jim Ross, president and senior managing director at State Street Global Advisors cautions, “Now is not the time to just buy some bonds and forget about it.” That approach could get you burned.

Ross instead urges investors to take a more active role in their fixed-income portfolio, especially as the threat of rising interest rates looms. That makes it more important than ever for investors to look at the bonds they hold and ensure that they’re diversified across the yield curve. It’s important to be nimble and reactive as interest rates rise and fall. [What the yield curve means for ETFs.]

As rates change, it affects bond exchange traded funds (ETFs) in different ways. A long-term bond fund will take a greater hit to its value when interest rates rise than a short-term bond fund. When interest rates fall, the reverse is true.

Just as you would take a diversified approach to the equity side of your portfolio – perhaps some allocation to emerging markets, some more to domestic stocks and so on – Ross urges investors to think of their fixed-income portfolio in the same way.

“If you look at where the inflows have been, it’s mostly core [bond] funds. Investors just go get the broadest thing out there,” Ross says. The trouble with that? “You’re taking on the risk of potential rate hikes.” [High-yield ETFs: Is the party over?]

You could also potentially be ignoring the bigger picture. When it comes to equities, investors often buy based on what they think will happen: small-cap may outperform large, or domestic stocks might outperform global ones.

“People need to look at bonds the same way.” Ross says. If you’re investing in a particular bond type because you have a specific view of the market, a broad fund won’t give you much of the exposure you’re seeking. [Benefits of international bonds.]

Ross is heartened by the increased allocation to fixed-income in many portfolios, up from 40% closer to 60%. But if bond funds represent that much of a chunk, he says, investors need to carefully consider what they should be buying.

If your view is that the U.S. dollar will continue to weaken, international Treasuries and both U.S. and non-U.S. Treasury Inflation-Protected Securities (TIPS) “make complete sense,” says Ross. [TIPS: Your questions answered.]

In the event of stagflation – little to no growth coupled with inflation – investors may head to the short end of the yield curve.

“The old buy-and-hold approach on the equity side didn’t necessarily work out in the last 10 years. Buy and hold on the fixed-income side may not necessarily help, either.”

Ross doesn’t feel this way simply because we’re in a low-rate environment, either. Taking a more active role in your fixed-income portfolio should be a long-term shift, he says. “You could make the case that it should have been there five years ago.” [How to research bond ETFs.]

The best yields right now, says Ross, are those coming from high-yield bond funds, such as the SPDR Barclays Capital High Yield Bond (NYSEArca: JNK), which is yielding 12%. iShares iBoxx $ High Yield Corporate Bond Fund (NYSEArca: HYG) is yielding 9.8%.

In a recent appearance on CNBC, Ross’s pick for the current environment is the SPDR Barclays Capital Short-Term Corporate Bond (NYSEArca: SCPB), which launched last month. It tracks the 1-3 year U.S. investment-grade corporate bond market.

Don’t be afraid to look abroad, either, says Ross. In fact, his feeling is that U.S. investors are under-allocated to international bonds for the same reasons they’re under-allocated in international equities. “Anytime you go outside the U.S., there’s more perceived risk.”

But international yields right now are a little better than those in the United States, meaning that they may be an opportunity for a yield pickup. An additional benefit of international fixed-income investing is that it’s a dollar play, as well. “If the dollar strengthens, you lose,” says Ross.

International fixed-income plays include the SPDR Barclays Capital International Treasury Bond (NYSEArca: BWX) and the SPDR DB International Government Inflation-Protected Bond (NYSEArca: WIP).

In the past month, the aerospace and defense sector has seen some gains in performance and more analysts are feeling bullish on the sector, according to Spade Index. Scott Sacknoff, the index provider for Spade Indexes, which is the underlying index for the PowerShares Aerospace and Defense (NYSEArca: PPA), points out that the sector has been tracking the S&P 500 closely for most of this year. “Things that move the market move the defense sector.”

Some positive factors going for it include:

• Troops in Afghanistan. President Barack Obama is sending an additional 30,000 U.S. troops to Afghanistan to combat the growing threat of hard-core insurgents and Taliban foot soldiers, reports Al Pessin for VOANews.
• War Tax. Congress is flirting with the idea of a special tax on high-income Americans to help pay for the war efforts.
• Boeing’s 787 Dreamliner. The Boeing Co.’s (NYSE: BA) 787 passenger jet “Dreamliner” made its maiden test flight on Tuesday, reports William Hennigan for The Los Angeles Times. The company promises that the Dreamliner will burn less fuel and last longer than other flying aircrafts. Airlines have already ordered 840 Dreamliners worth $140 billion, which made this aircraft the fastest-selling new commercial jetliner in history.
• Growing threats. Conflict doesn’t magically disappear and there will be a need to combat new threats by increasing offensive weapons. [Are A&D ETFs set to take off?]
• Economic expansion. Improvements in the economy will lead to job creation, economic growth and improved tax revenue that would help defense spending.

Sacknoff says that there are plenty of differences between perception and reality when it comes to the aerospace and defense sector. Sacknoff says that people tend to compare defense sector cycles alongside the U.S. economy. “The problem with making comparisons is that people tend to think we’re in a safer environment, and the world is not necessarily a safer place.”

A few cases in point: More troops are going to Afghanistan and a pullout, which could take awhile, isn’t expected to begin until 2012. We’re also still in Iraq. Iran seems unwilling to listen to the United States’ warnings, there are computer hackers working day and night to get into the government’s computers. “There’s still a lot of risk in the world,” he says.

Even after 2012, Sacknoff says, defense spending may not abate much as the government uses much of its defense budget to replace things left behind in the wars. That includes bullets, tanks and other equipment.

Many defense companies also benefit from diversification, Sacknoff points out. Many of them have their hands in commercial projects, cyber security and even clean energy. These companies are well aware of the cycles and have positioned themselves to cope as defense spending ebbs and flows.

For more information on the aerospace and defense industries, visit our aerospace & defense category.

• PowerShares Aerospace and Defense (NYSEArca: PPA): up 22.8% year-to-date; Boeing is 6.4%

• iShares Dow Jones US Aerospace (NYSEArca: ITA): up 25.8% year-to-date; Boeing is 7.4%

Max Chen and Heather Hayes contributed to this article.

ALPS Advisors and Jefferies kicked things off in September with the first ETF, with a twist: instead of holding futures or physical commodities, the fund holds equities:

• Jefferies|TR/J CRB Global Commodity Equity Index Fund (NYSEArca: CRBQ)

Satch Chada, Jefferies’ Managing Director and Head of the Investor Solutions Group, says that “The introduction of these ETFs is notable on a number of levels. Not only is it the first investable equity product for the CRB, it’s also the first in a series of commodity-related funds based on these new equity indices, and the first ETF under the Jefferies brand”

Immediately following the launch of the first ETF, on October 27, 2009, ALPS and Jefferies launched

• Jefferies|TR/J CRB Global Industrial Metals Equity Index Fund (NYSEArca: CRBI)
• Jefferies|TR/J CRB Global Agriculture Equity Index Fund (NYSEArca: CRBA)

CRBI tracks companies that produce and distribute metals such as copper, aluminum, iron ore and steel. CRBA tracks producers of fertilizers, farming equipment, irrigation, agricultural products, livestock and aquaculture.

For each of these ETFs, Jefferies acts as a brand licensor for the enterprise, and ALPS Advisors acts as the ETF adviser.  According to SEC filings, ALPSin pipeline are several more funds:

• Jefferies | TR/J CRB Wildcatters Exploration & Production Equity ETF, which will focus on small-cap companies that derive most of their revenues from the exploration and production of energy products, including natural gas
• Jefferies | TR/J CRB Global Precious Metals Equity Index Fund
• Jefferies | TR/J CRB Global Energy Equity Index Fund
• Jefferies | TR/J CRB Natural Gas Equity ETF

Currently, CRBQ is the provider’s broadest fund, which tracks an index composed of companies involved in the production and distribution of commodities and commodity-related products and services in the agriculture, base/industrial metals, energy and precious metals sectors. The annual expense ratio is 0.65%.

Three particular benefits of investing in commodity equity ETFs are:

• Investors benefit from the knowledge that a commodity producer brings to the table; no expertise on the investor’s part is required
• Commodity ETFs that hold futures or physical commodities can trigger K-1s at tax time
• Commodity equity ETFs won’t be subject to any Commodity Futures Trading Commission (CFTC) position limits that are handed down (More on the CFTC’s actions)

Commodity investing in general has been gathering interest on the back of a weakening dollar, fears of inflation and potential supply constraints down the line as the world’s population continues to expand. (How to hedge against a weakening dollar).

In the future, Jefferies wants to expand beyond commodities. “We are seeking to expand our line-up,” Chada says. “We’re committed to providing institutional-quality investment products and themes for individual investors.”

Jefferies expanded into ETFs because, in Chada’s words, “ETFs offer important benefits, including transparency, liquidity and low-costs, and have quickly become the platform of choice for many institutional and individual investors alike” The ETF industry has ballooned to a record $751 billion in assets as of Nov. 30, so it’s no surprise that more and more established financial industry players want to get in on the action.

For more stories about commodity ETF investing, visit our commodity ETF category.