Fred Jheon is managing director and head of product development, U.S., for ETF Securities. Before joining ETF Securities, Jheon was a leader in portfolio management, product development and finance at Barclays Global Investors (BGI).
He was part of the inception team for iShares in 2000 and served on steering committees developing over 100 funds. Jheon holds an MBA from the University of Toronto and a BA from the University of Alberta and is a licensed CPA.
Research: ETF Securities is relatively new in the U.S. ETF marketplace, but not new to the ETF business. Please explain.
Jheon: ETF Securities recently entered into the U.S. ETF marketplace with our first listed product, ETFS Physical Silver shares (SIVR), on the NYSE in July 2009. About two months later, we listed ETFS Physical Swiss Gold shares (SGOL) As part of the global business strategy, we have had our eyes on the U.S. market for a while. We thought that the demand for commodity ETFs, especially precious metals, was strong and therefore the time was right to launch here.
ETF Securities has a compelling history of being innovators and pioneers in commodity ETFs. The management of ETF Securities created the world’s first gold ETF (GOLD) back in 2003 in Australia.
The first gold ETF was remarkable in the fact that it was not only the world’s first gold ETF, but actually the first time anyone had listed a commodity on a stock exchange. The company then went on the launch the first oil ETF in 2005 in Europe and a full platform of commodity products thereafter totaling over 130 different commodity exposures.
ETF Securities is now a global business with commodity ETFs listed in Europe, U.S., Australia and Japan. Our goal here in the U.S. is to become the leading provider of commodity ETFs.
How does the U.S. ETF market compare to Europe and the rest of the world?
The U.S. ETF marketplace is the largest market globally. Currently the estimated size of ETF holdings is about $650 billion, but studies indicate the growth trajectory will continue towards $2 trillion by the end of 2011. Comparatively, the European market is approximately a third of the U.S. in terms of assets under management.
However, the number of products offered in Europe is on par if not more than the number of products offered in the U.S. In terms of commodity ETFs, the range of products available in Europe is ahead of where the U.S. ETF market is right now. We are working very hard to change that and to offer U.S. investors a similar set of products to those available to European investors.
Your firm recently launched SGOL. How is it different from other gold ETFs like GLD and IAU?
Yes, we recently launched a physically backed Swiss gold ETF. Let me start with the similarities. The structure is a 1933-act grantor trust and is physically backed with gold bullion. Each share represents the USD equivalent to approximately one tenth of an ounce of gold. However, the differences are compelling and SGOL is really a reflection of creating a product to satisfy investor demand. SGOL is differentiated from others by storing the physical gold in Switzerland, rather than the U.S. or U.K. like other products.
This is a way for investors to diversify their gold holdings not only by geography but also by custodian, issuer and vault as well. Switzerland is recognized internationally as a neutral country, an international banking center and gold storage location and has had no gold confiscation history like the US. Investors can access unique gold bar numbers by going onto our website.
The gold bars held in the SGOL custodian vault are independently inspected twice a year by a third party. SGOL is also the lowest priced physically backed ETF in the U.S. with an expense ratio of 0.39 percent.