Crude Oil along with other commodities, are getting blitzed this morning on an early gap-down, and not before prominent linked fund USO (United States Oil Fund, Expense Ratio 0.45%) lost more than $150 million in net inflows in recent sessions.
USO remains the largest linked Crude Oil ETP in the marketplace (having debuted back in 2006) despite the criticism about how it has performed during periods of contango in futures markets, with $1.34 billion in assets under management. DBO (PowerShares DB Oil, Expense Ratio 0.79%) is significantly smaller, with $480 million in AUM currently (having debuted in 2007) and demonstrating the “first comer’s” advantage that is evident from a marketing standpoint in the ETF landscape.
Other products that track Crude Oil (both WTI and Brent) prices that are also in play here given the thumping that Oil prices are taking (along with everything else) include OIL (iPath ETN S&P GSCI Crude Oil, Expense Ratio 0.75%), USL (United States 12 Month Oil Fund, Expense Ratio 0.60%), BNO (United States Brent Oil Fund, Expense Ratio 0.94%) and a number of much smaller products in terms of overall assets under management.
In fact, of the aforementioned ETPs, OIL only has $322 million in AUM, USL $80 million, and BNO $44 million, so the “Oil” space in ETP terms is extremely small when compared to the open interest and turnover via oil futures and other derivatives that are traded actively in the marketplace. [Gold, Silver ETFs Routed After Fed]
Thus, the Oil ETPs are not exactly leading indicators yet, because they are far from broad based institutional embrace, but are nice to look at as far as being proxies to what is happening behind the scenes in terms of futures prices.
We suspect that as track records grow longer (remember USO the largest fund in the category only debuted in 2006, and despite its inefficiencies has still attracted a following and assets to go along with it) across Oil tracking ETPs, that there will be more adept usage by not just investment management firms but natural “hedgers” alike, including insurance companies, industries where rising/falling Gasoline and Oil prices can seriously complicate operating expenses (Airlines as the most basic example) if forecasts are off, and if sudden jolts of volatility hit the marketplace on broader “macro” events, such as what we are seeing today.
For more information on Street One ETF research and ETF trade execution/liquidity services, contact Paul Weisbruch at pweisbruch@streetonefinancial.com.
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