Today we briefly examine the Livestock sub-sector within the greater Commodity space, which is an area of investment via ETPs that we imagine many investors are not yet aware of.
While many institutional managers as well as registered reps are likely familiar with trading futures based on the Livestock markets, investing directly via ETPs is a much newer theme.
Reps that are not licensed to sell commodity futures but have clients that are either speculators if not natural hedgers in the livestock markets, will likely at least take some interest in the availability of Livestock based ETPs in the marketplace.
COW (iPath DJ-UBS Livestock Total Return Sub-Index ETN, Expense Ratio 0.75%) is the most tenured ETP in this space, debuting back in 2007.
The fund remains somewhat small, with only $53.8 million under management, averaging about 26,000 shares traded on a daily basis.
Since this is niche oriented as well as an ETN and not an ETF, it is perhaps somewhat expected that asset growth over time would be slow going.
COW is designed to track the returns of two listed Livestock commodity futures (Lean Hogs and Live Cattle) and at times the fund has displayed significant intraday volatility, likely due to the poor timing of ETF orders and/or the approach used when executing such orders (we suspect that market orders on a few thousand shares at a time often enter the market on this particular ETN, especially at sub-optimal trading times, which can potentially cause some ugly intraday candlestick charts).
Two other much smaller funds are also in this category, UBC (UBS E-TRACS CMCI Livestock Total Return ETN, Expense Ratio 0.65%) and LSTK (iPath Pure Beta Livestock, Expense Ratio 0.75%). LSTK barely trades (averages 930 shares daily), and has a paltry $2.2 million in assets under management, while UBC is only slightly bigger in fund size and no more prominent.
This sub-sector is clearly a niche within the larger “Commodity” space, but likely suffers from lack of awareness to a large degree outside of and even possibly among those managers that are running commodity pure strategies using ETPs and/or futures, and the small sizes of the related ETPs here likely scares of potential larger institutional allocations due to misconceptions about trading volume/liquidity and fund sizes in terms of AUM. However, someone in COW is paying attention as the fund traded more than 300,000 shares in one session alone just five sessions ago.
iPath DJ-UBS Livestock Total Return Sub-Index ETN
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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