Exchange Traded Fund (ETF) Trading Strategies

Wednesday, October 28, 2009

Jefferies rolls out two more commodities ETFs

Just weeks after launching its first commodities exchange-traded fund, a unit of Jefferies & Co. Inc. today launched two similar ETFs: one focused on agriculture and another on industrial metals.

Like its first commodities ETF, launched Oct. 5, the Jefferies TR/J CRB Global Agriculture Equity Index Fund (CRBA) and the Jefferies TR/J CRB Global Industrial Metals Equity Index Fund (CRBI), from Jefferies Asset Management LLC, are somehwat unusual.

Both invest in the stocks of companies that produce and distribute commodities and commodities-related products, whereas most other commodities ETFs invest in commodities futures.

But commodities ETFs that are based on futures have run into trouble because the Commodity Futures Trading Commission has concerns over excessive speculation in futures markets, which was seen in the run-up in oil prices last year and in 2007.

The CFTC has expressed concern that exchange-traded products may have helped facilitate such speculation.

“Commodity investing need not be one dimensional,” Adam De Chiara, co-president of Jefferies Asset Management, said in a statement.

“At times, commodity equities may outperform futures and vice versa. At times, certain commodity sectors may present more favorable investment opportunities.”

The two new ETFs have an expense ratio of 0.65%.

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