Van Eck Global filed with the Securities and Exchange Commission to market a broad-based commodity futures exchange traded fund (ETF) designed to minimize the negative impact that contango can have on funds that trade futures contracts.
Olivier Ludwig for Index Universe reports that the Market Vectors CM Commodity Index ETF will invest in commodity-linked derivative instruments, such as commodity index-linked notes, swap agreements, commodity futures contracts and options on futures contracts. The ETF will track the commodities in the UBS Bloomberg Constant Maturity Commodity Total Return Index. [3 Points of Caution With ETF Investing.]
The index will track 26 commodities from sectors such as energy, precious metals, industrial metals, agriculture and livestock. Futures for each commodity will have maturities ranging from three months to more than three years.
Contango – when the futures price is higher than the spot price – has been a hot-button issue of late. ETF providers are working not only to educate investors on the impact of contango, but they’re also coming up with new strategies to mitigate it.
This fund looks like it’s taking the approach of spreading out futures contracts across the curve in order to keep a limit on contango’s effects.
Tisha Guerrero contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.