AdvisorShares Launches 4 Innovative Gold ETFs - ETF News And Commentary
February 18 2014 - 2:02PM
Zacks
Given the performance of the market so far in 2014, it is pretty
safe to say that this year won’t be as smooth as what investors saw
in 2013. With this added volatility hanging in the background and
fears over the taper, it could be a year to look once again at
lower risk investments.
And with the performance of commodities lately, the demand for
natural resources could be elevated, and particularly in the case
of precious metals like gold. After all, gold saw a terrible 2013,
but with sluggish stocks and worries over emerging markets, the
metal has come back into focus (also see Inside 2013’s Best Gold
ETF).
Gold ETFs have risen to start the year and hopes are again
springing for a solid run for the important precious metal. And
while investors have a number of ways to target gold with ETFs, a
new lineup of gold funds from AdvisorShares could break this space
wide open for investors who want to make a truly international play
with their gold investment.
New Gold ETFs in Focus
AdvisorShares announced that it was releasing four new active gold
ETFs, however, they have a twist. The funds will buy gold in
foreign currencies allowing precious metal investors to diversify
their holdings across currencies, and to help fight against U.S.
dollar losses (See all the Currency ETFs here).
In essence, the funds will short currencies and buy gold, looking
to give investors options to buy the precious metal in the most
undervalued markets. Thus, investors who are bullish on gold can
target their exposure in specific foreign currencies, thus making
an even more targeted—and global—bet on the precious metal market.
This novel approach will be taken with three currencies in
particular, the British pound, the Japanese yen, and the euro.
These currencies rank as the most liquid—after the dollar—and U.S.
investors can now use them to buy gold in the following funds:
- AdvisorShares Gartman Gold/Yen ETF: GYEN
- AdvisorShares Gartman Gold/British Pound ETF:
GGBP
- AdvisorShares Gartman Gold/Euro ETF: GEUR
All three of these new products look to charge investors 55 basis
points a year in management fees, and then have 15 basis points a
year in fees of ‘other expenses’. However, the group has a five
basis point a year waiver, keeping the net expense ratio at 0.65%.
The products will be structured as traditional ’40 Act funds, and
thus will avoid K-1 issues and other tax headaches for investors,
allowing them to be accounted for on a 1099.
All of the funds will obtain their currencies via exchange-traded
futures, or using over the counter foreign exchange forward
contracts. The respective currencies will also be borrowed
based on the yield curve in order to determine the most cost
effective maturity at which to borrow euros to fund the gold
purchases.
Investors should also note that Dennis Gartman, of
the Gartman
Letter fame, will also be lending his expertise to the funds.
Gartman is well-known for his belief in cross trading of currencies
and commodities, and obviously these funds allow the masses to
apply this strategy to their own portfolios.
Beyond Gartman’s involvement, Treesdale Partners will be
sub-advising the fund, a company that has a focus on managing
currency and commodity-based alternative investment products for
investors (see all the Broad Commodity ETFs here).
"
Dennis Gartman's
widely recognized analysis and commentary among leading corporate,
financial and trading institutions is well-known, and we believe
Treesdale adds another deeply experienced portfolio manager to the
AdvisorShares active ETF suite," said Noah
Hamman, chief executive officer of AdvisorShares in a press
release. "We are pleased to partner with their combined expertise
in bringing more innovative investment solutions to the active ETF
marketplace."
Broad Play
Beyond
these three, AdvisorShares also released a broad product that goes
across a number of currencies, the AdvisorShares
International Gold ETF: GLDE. This product will use a
combination of GYEN, GGBP, and GEUR for its exposure, while it will
also invest in some closed-end funds, underlying ETFs, ETNs, or
other exchange-traded products in order to gain various types of
exposure to the international gold
market.
The fund
will also be able to actively manage its exposure, so if for
example, managers believe that gold is undervalued in euros, the
product can shift its exposure to that currency. Investors have to
pay for this exposure though, as the management fee comes in at 80
basis points a year, while the net expense ratio is at 1.52%,
putting it at the very high end of the gold space, but in line with
other active commodity products on the market (it also has a ’40
Act structure, eliminating the need for a
K-1).
ETF
Competition
These
ETFs are first-of-their-kind to target the gold market with foreign
currencies, while they are also the first to put an active twist on
the gold ETF world. However, they are by no means the first gold
ETFs to hit the market, as the space is already rife with
competition (see all the Precious Metals
ETFs).
The
biggest funds in the space are the SPDR Gold Trust
(GLD)
and the iShares Gold Trust
(IAU), which have, respectively,
$32 billion and $6 billion in assets under management. Beyond these
ultra-popular names though, investors also have access to a variety
of other gold ETFs, including a product that houses all of its gold
in Switzerland—
SGOL—and one that puts all of its
bullion in Singaporean vaults—
AGOL.
Any of
these products look to be fierce competitors for the new gold
foursome from AdvisorShares, and especially so since the products
listed above are all cheaper than the active ETFs from
AdvisorShares. Still, for investors looking for a new way to play
gold—and to make a bet on currencies too—the fresh funds from
AdvisorShares could be worth a closer look, and may open the gold
ETF world even more to retail
investors.
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ETFS-ASIAN GOLD (AGOL): ETF Research Reports
SPDR-GOLD TRUST (GLD): ETF Research Reports
ISHARS-GOLD TR (IAU): ETF Research Reports
ETFS-GOLD TRUST (SGOL): ETF Research Reports
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