iShares, the ETF platform of BlackRock, has expanded its commodity range with the launch of four new ETFs tracking the latest generation of S&P GSCI Index.
iShares expands commodity range with four new ETFs.
The four funds are the iShares S&P GSCI Dynamic Roll Agriculture Swap ETF, the iShares S&P GSCI Dynamic Roll Energy Swap ETF, the iShares S&P GSCI Dynamic Roll Industrial Metals Swap ETF and the iShares S&P GSCI Dynamic Roll Commodity Swap ETF.
The funds have been listed on the London Stock Exchange and offer diversified exposure to agriculture, energy, industrial metals and the broad commodity market, respectively, as represented by the S&P GSCI Dynamic Roll Index.
The S&P GSCI Dynamic Roll Index is a dynamically rolling commodity futures index, employing a flexible monthly futures contract rolling strategy. It has been specifically designed to meet the demands of investors seeking to alleviate the negative impact of rolling into contango (where the cost of a commodity for longer dated delivery is greater than that for shorter dated delivery) and potentially limit volatility exposure to the commodity market.
The funds have been structured to achieve full UCITS compliance, and are an alternative to purchasing individual futures or investing directly in physical commodities.
While BlackRock has in the past stated a preference for developing physically-backed products, certain market exposures cannot adequately be achieved in physical format; the commodity exposures represented by the S&P GSCI Index are one such example.
With a swap-based approach the only viable mechanism, Blackrock has taken significant measures to ensure high levels of transparency and investor protection.
These measures include the diversification of swap positions among multiple unaffiliated swap counterparties; the management of counterparty exposure through over-collateralisation of up to 120% on a daily basis, using high quality collateral; the ability for investors to see detailed product information, updated daily on the iShares website; and clarity in product labelling.
The funds each come with a total expense ratio (TER) of 0.45% and, at launch, the swap counterparties are UBS, Credit Suisse and RBS. Though the funds are eligible for ISAs and SIPPs, they do not currently have UK Distributor/Reporting status.
Commenting on the launch, Axel Lomholt, Head of iShares Product Development EMEA, said, “We’ve seen sustained interest from professional investors for new commodity exposures, driven by a desire to diversify their portfolios. To meet this demand, we have extended our commodity range with new exposures, delivered in a highly transparent, risk-managed and regulated UCITS structure.
“These new products are the latest step in our efforts to bring new levels of disclosure, transparency and risk management to the ETF sector. They are based on [a] multi counterparty swap platform, and set a standard for the quality and level of collateralisation that we believe can help improve the marketplace for ETFs.”