For the first time ever, there is now an ETF based on futures contracts, and the fact that it uses derivatives is a form of encouragement for new commodities ETFs to step forward and do the same, according to MarketWatch.
"It's a huge development for ETFs because now you can conceivably launch a fund on anything that has futures and equitize it," said Jim Wiandt, publisher of the investing Web site IndexUniverse.com. He added that the ETF should be cheaper than mutual funds that invest in commodities.
Another appealing aspect of the new commodities ETF is the fact that it is not affected by the recent IRS ruling, which directly affects existing commodities mutual funds. The reason it does not affect the ETF is because it is prearranged as a commodities pool, and not a registered investment company.
"Adding commodities to a portfolio is a great diversification benefit," said Kevin Rich, a director in the commodities asset-structuring group at Deutsche Bank.
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