Compared to stocks and bonds, commodities still have a lot of respect to gain as a “standard” asset class, and PowerShares and Deutsche Bank hope to accelerate that change.
In January, the two companies teamed up to bring seven commodity sector funds to the American Stock Exchange (Amex). The new PowerShares DB Commodity Sector Funds include:
o PowerShares DB Energy Fund (DBE)
o PowerShares DB Oil Fund (DBO)
o PowerShares DB Precious Metals Fund (DBP)
o PowerShares DB Gold Fund (DGL)
o PowerShares DB Silver Fund (DBS)
o PowerShares DB Base Metals Fund (DBB)
o PowerShares DB Agriculture Fund (DBA)
As with previous exchange-traded commodity products, one of the key benefits of the new offerings is that they provide convenient market exposure to commodities via a traditional brokerage account, saving investors the hassle of establishing a futures trading account or storing the physical commodities.
While commodity-linked trusts resemble ETFs, they are registered as grantor trusts under the Securities Act of 1933. Traditional ETFs are typically registered under the Investment Company Act of 1940. Aside from these differences, both offer intraday trading.
According to the prospectus, expense ratios on all the new funds are 0.75 percent, not including estimated brokerage costs.
The funds employ a technique called “Optimum Yield,” which aims to minimize the effects of negative roll yield when markets are in contango and to maximize the effects of positive roll yield when markets are backwardated. The funds enter into long exchange-traded commodity futures positions and generate interest income through Treasury securities held as collateral for the futures contracts they own.
In February 2006, Deutsche Bank introduced the first commodity-linked fund, the DB Commodity Index Tracking fund (Amex: DBC). Since then, PowerShares has teamed up with the firm to offer more exchange-traded products.
“We are delighted to partner with the Amex and PowerShares for the launch of seven new commodity funds and pleased that a wider range of investors can now access the Deutsche Bank Liquid Commodity indices,” said Kevin Rich, Chief Executive Officer of DB Commodity Services, the managing owner of the new funds.