A London-based pioneer in commodity exchange-traded funds has quickly made a splash in the United States, and plans to become a force here.
“Our mission is quite simple,” said William Rhind, strategic director for U.S. business development at ETF Securities Ltd. “We want to be the leading provider of commodity ETFs in the U.S.”
Since debuting in 2009, ETF Securities USA has launched five exchange-traded products and gathered $2.8 billion in assets. The company has 19 more commodity funds in registration.
ETF Securities LLC has a significant presence in Europe, with about 200 exchange-traded products and $24 billion of assets under management, most of it invested in commodity products. Its exchange-traded products are traded in five currencies and listed on nine major exchanges.
The company’s founder, Graham Tuckwell, developed the world’s first Gold ETF, in Australia, in 2003, and brought it to U.K. the following year.
In the United States, ETF Securities has funds that focus on gold, silver, platinum and palladium. To differentiate its gold ETF from U.S.-based rivals, the firm backs its shares with gold bars that are acquired as needed and stored in Switzerland.
The company uses an independent inspector to verify the contents of its vaults twice a year. One inspection is scheduled, and the other is random, said Rhind.
Far and away the most popular gold ETF is State Street Global Advisors’
SPDR Gold Trust; its assets recently totaled $55.8 billion.
U.S. investors asked ETF Securities to create its gold fund with an eye toward history. During the Great Depression, the federal government confiscated privately owned gold. That has never happened in Switzerland, Rhind has noted. Investors can find daily updates on ETF Securities’ website of the bars of gold and other precious metals being held for the company.
“We believe we’re the most transparent out there,” said Rhind.
ETF Securities also competes on price, offering low management fees for its gold and silver funds. It has the first platinum and palladium ETFs available in the United States, and its GLTR basket is unique as well.
Most recently, ETF Securities launched the first U.S.-based, physically backed precious metal exchange-traded product. Going by the ticker symbol GLTR, it holds gold, silver, platinum and palladium in fixed weights.
Precious metals have been popular investments for a number of reasons, ranging from inflation concerns to the recovery of the automobile industry. Silver prices have lately gained momentum, but gold in particular has had a long run, to more than $1,400 per ounce.
Demand for gold derives from the fear for inflation in part. But a low interest-rate-yield environment is also driving prices of gold and other precious metals, said Detlef Glow, a research analyst with Lipper, a Thomson Reuters company.
The low-yield environment serves to make liquid, non-yielding assets like gold and other precious metals look favorable to cash or other short-term money market instruments, he said. And gold’s price momentum has in turn created more demand, he added.
Rhind added that investors are banking on precious metals for diversification. “One of the key reasons investors have been allocated to precious metals is simple correlation,” he said.
During the 2008 market crash, investors were surprised to find correlations between asset classes merging, and they are turning to precious metals as an asset class that has low correlation to stocks, he said. For that reason, the success of ETF Securities’ products is not predicated on fears on inflation, he said.
Meanwhile, platinum and palladium are popular for a separate reason. They are used in the automobile industry, which has begun to recover in recent months, driving up demand.
ETF Securities’ basket fund, GLTR, has gathered more than $100 million in assets since debuting October 22 on the NYSE Arca exchange. The fund is aimed in part at investors who do not want to try to pick which of the four precious metals is likely to outperform the market.
“An adviser who specializes in picking equities, for example, can use this if they’re not an expert,” said Rhind. For some investors, buying the metals as a group will serve to avoid the cost of buying them individually, he added.