Houston-based CNIC Funds has made its ETF debut with the launch of a novel fund providing carbon-neutral exposure to the broad US electricity market.
The fund delivers carbon-neutral exposure to US electricity futures, a first for the ETF industry.
The CNIC ICE US Carbon Neutral Power Futures Index ETF (AMPD US) has been listed on NYSE Arca with an expense ratio of 0.95%.
According to CNIC, the fund represents a first for the ETF industry as, despite electricity’s growing impact on the global economy, electricity futures are not directly included in any existing major commodity index.
Methodology
AMPD is linked to the recently created ICE US Carbon Neutral Power Index which provides long exposure to ICE electricity futures contracts from six regional power pools in the US.
Each region is weighted based on its reported average annual load (measured in megawatt hours) so as to make the index broadly representative of electricity consumption in the US.
The index includes futures contracts expiring in each of the following 12 months which, combined with a staggered rolling methodology, aims to stabilize returns by minimizing the seasonal volatility inherent in the US power market.
In addition to the electricity futures, the index also includes sufficient carbon allowance futures contracts which serve to offset the carbon emissions generated by the electricity associated with the futures.
According to CNIC, the strategy offers investors inflation mitigation and potentially better portfolio diversification than many other commodity-based products currently in the market.
Timothy J. Kramer, CEO of CNIC Funds, commented: “Electricity plays a critical role in all aspects of manufacturing and transportation, and with a high correlation between the CPI and electricity prices, we believe there is a significant need in the marketplace for this product. CNIC is proud to bring AMPD to the market as the only commodity-based carbon neutral product that seeks to provide inflation mitigation and portfolio diversification.”
Donald R. Sinclair, Chairman of CNIC Funds, added: “With the utilization of the six major US power pools, AMPD will broadly represent total US electricity consumption and the associated US power prices. We believe there is significant investor demand for a carbon-neutral commodity-based financial product, and we are excited to be able to team up with ICE to bring this product to the market. The launch of AMPD illustrates CNIC’s commitment to developing quantitative and market knowledge-based products for investors.”