Contango and the rolling costs of holding futures can add up over time. Although most inverse and leveraged futures-based ETFs continue to increase in popularity, their initial intended use was for short-term positioning. Statistics show that investors and advisors are holding these products for extended periods. AccuShares hopes to offer new ETFs that provide appropriate market representation with less of the cost of carry.
AccuShares Investment Management is entering the exchange traded fund arena with a suite of alternative strategies that could help investor track the spot price movements of a group of commodities and the CBOE Volatility Index, or VIX.
According to a Securities and Exchange Commission exemptive relief filing, AccuShares is working seven paired-class share ETFs that move in opposite directions, or so-called Up Shares and Down Shares:
- AccuShares S&P GSCI Spot Fund Up Shares (GSCU)
- AccuShares S&P GSCI Spot Fund Down Shares (GSCD)
- AccuShares S&P GSCI Agriculture and Livestock Spot Fund Up Shares (AGUP)
- AccuShares S&P GSCI Agriculture and Livestock Spot Fund Down Shares (AGDN)
- AccuShares S&P GSCI Industrial Metals Spot Fund Up Shares (MTLU)
- AccuShares S&P GSCI Industrial Metals Spot Fund Down Shares (MTLD)
- AccuShares S&P GSCI Crude Oil Spot Fund Up Shares (SPTU)
- AccuShares S&P GSCI Crude Oil Spot Fund Down Shares (SPTD)
- AccuShares S&P GSCI Brent Oil Spot Fund Up Shares (BRTU)
- AccuShares S&P GSCI Brent Oil Spot Fund Down Shares (BRTD)
- AccuShares S&P GSCI Natural Gas Spot Fund Up Shares (NGUP)
- AccuShares S&P GSCI Natural Gas Spot Fund Down Shares (NGDN)
- AccuShares Spot CBOE VIX Fund Up Shares (VXUP)
- AccuShares Spot CBOE VIX Fund Down Shares (VXDN)
AccuShares’ patented design, which include U.S. patent numbers 8,732,070, 8,630,935 and 8,538,860, allow the firm to accurately track the futures market without dealing with the negative effects of rolling futures if the market is in a state of contango.
Each ETF is designed for investors seeking cost-effective, targeted and transparent exposure to various spot and spot proxy prices represented by the ETF’s Underlying Index. AccuShares intends to offer two class shares in each ETF, one designed for investors with a positive view of future index performance and one designed for investors with a negative view of future index performance.
“Each Fund tracks its Underlying Index’s changes without the need to hold any securities, commodities, futures or other financial instruments relating to its Underlying Index or the assets referenced by the Underlying Index,” according to the SEC filing. “Instead, each Fund is expressly limited to holding only: cash; bills, bonds and notes issued and guaranteed by the United States Treasury with remaining maturities of three months or less (‘eligible Treasuries’); and over-night repurchase agreements collateralized by United States Treasury securities (‘eligible repos,”’together with cash and eligible Treasuries, ‘Eligible Assets’).”
Consequently, the AccuShares ETFs will execute cash distributions and potentially paired share distributions to deliver the exposure of the underlying index.
The ETF provider is expected to come out with the CBOE VIX options first sometime in the second quarter. AccuShares has also partnered with Robert Whaley, who developed the CBOE Market Volatility Index “VIX” for the Chicago Board Options Exchange, to launch the new volatility ETFs as an more efficient alternative to other VIX futures-based options on the market.
Will the AccuShares products bring longer term positioning economics to the futures markets? We’ll keep you posted as this story develops.
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.