House Price Crash forum > Etfs And Etcs

Bear Monger

Jun 22 2007, 02:24 PM

Yesterday I bought my first ETF and I wondered if anyone else had dabbled with these yet? I went for the IEER from iShares which holds shares in Russia (Gazprom) and many Eastern European stocks. I figured I would avoid the FTSE and American markets for the time being.

I was also looking at ETCs (like ETFs but they track commodity prices). The main players in the UK seem to be ETF Securities but I can't get my head round how they work. I think commodities will do very well in the next couple of years and would like to get involved. I found the following prospectus:
Prospectus but it seems to have been written by someone with very poor communication skills. For instance, what the hell does this mean:

QUOTE

ETFS All Commodities DJ-AIGCISM (AIGC) is designed to track
the DJ-AIG Commodity Sub-IndexSM and pays a capitalised
interest return which cumulates daily. The Index is an
“excess return” index and the interest component combines
to give a total return investment.

I'm guessing this fund doesn't pay a dividend but I can't see how the investment will work - do you just make money with the rising "share" price. If so, it doesn't look like a great bet to me.

So, does anyone else have any experience of these? Can you see what I can't?

Sand Man

Jun 24 2007, 11:42 AM

QUOTE(Bear Monger @ Jun 22 2007, 05:24 PM) [snapback]674363[/snapback]

Yesterday I bought my first ETF and I wondered if anyone else had dabbled with these yet? I went for the IEER from iShares which holds shares in Russia (Gazprom) and many Eastern European stocks. I figured I would avoid the FTSE and American markets for the time being.

I was also looking at ETCs (like ETFs but they track commodity prices). The main players in the UK seem to be ETF Securities but I can't get my head round how they work. I think commodities will do very well in the next couple of years and would like to get involved. I found the following prospectus:
Prospectus but it seems to have been written by someone with very poor communication skills. For instance, what the hell does this mean:
I'm guessing this fund doesn't pay a dividend but I can't see how the investment will work - do you just make money with the rising "share" price. If so, it doesn't look like a great bet to me.

So, does anyone else have any experience of these? Can you see what I can't?

Hi Bear Monger,

These are Exchange Traded Commodity (ETC) Funds. These funds are different from ETFs since they invest in the underlying commodity via futures contracts on the the commodities. So for example, if you wanted to invest in the sugar market there is an ETF called ETFS Sugar (where the identifier is SUGA). This ETF invests in sugar via the futures market rather than buying physical sugar directly.

This means that the price of the ETF varies according to the price changes of the sugar futures markets (which can get complicated and depends on the shape of the futures curve for the particular commodity). But broadly speaking, if you expect the price of the commodity to rise significantly then the price of the ETF should follow. However, you will not get a dividend.

Share ETFs are much simpler because they just invest in the share market and the price of the ETF just reflects changes in the value of the underlying stocks.

The fund you are looking at is one that invests in all commodity markets (although has a high proportion to energy).

Hope this helps,

Bear Monger

Jun 24 2007, 11:50 AM

Thanks Sand Man - much appreciated. I have read a little more and was thinking of investing a small amount of capital in OILB which tracks the price of Brent Oil. I'll let you know how I get on.