One of Europe’s most prominent ETF sponsors has jumped across the pond, making its initial foray into the U.S. markets. ETF Securities (ETFS), which has about $12 billion invested in more than 130 products worldwide, launched the ETFS Silver Trust (SIVR) on Friday. The new fund will trade on the NYSE Arca Exchange, and has an initial expense ratio of 0.30% (the expense ratio will be capped at 0.45% after July 24, 2010).
ETFS has a history of innovations in the ETF industry. The company, led by chairman Graham Tuckwell, developed the world’s first gold exchange-traded product in Australia and London and launched the first crude oil ETP in 2005. The company is perhaps best known for a full line of commodity ETPs, but also offers a number of leveraged and inverse leveraged funds, as well as equity ETFs offering European investors exposure to the U.S. markets. ETFS’ products are traded in the UK, Germany, France, the Netherlands, Italy, Ireland, and Australia. SIVR marks the first ETFS product available to U.S. investors. ETFS is also pioneering a “third generation” ETF platform that uses multiple swap counterparties.
Challenging The Big Dogs
Although ETFS is relatively small compared to the large players in the U.S. ETF market, its larger rivals are surely taking notice, as SIVR will compete with a number of existing funds. Below is a list of silver ETFs currently available:
| Issuer | Fund Name | Ticker | Invests In | Expense Ratio | Avg. Volume |
|---|---|---|---|---|---|
| iShares | Silver Trust | SLV | Silver bullion | 0.50% | 9.0 million |
| PowerShares | PowerShares DB Silver Fund | DBS | Futures contracts | 0.50% | 96,000 |
| UBS | E-TRACS UBS Bloomberg CMCI Silver ETN | USV | Futures contracts | 0.40% | 1,000 |
| ETF Securities | Silver Trust | SIVR | Silver bullion | 0.30%-0.45% | n/a |
Despite the significant size of some of some of its competitors (SLV has a market capitalization of nearly $4.0 billion), SIVR will likely attract investor assets due to its attractive expense ratio. While investors are sometimes hesitant to put their assets into ETFs offered by new companies, ETFS has a solid track record in Europe, which should allay any fears potential investors may have. The key test, of course, will be whether SIVR is able to attract enough assets to establish a sufficient level of liquidity. As with all new ETFs, there is a “ramp-up period” during which the fund may experience illiquidity and low trading volume. Typically, once a security reaches a daily volume of about 25,000 shares, liquidity concerns dissipate. SIVR have volume of 6,800 shares on Friday.
If SIVR’s launch is a success, we’ll likely see a slew of new funds from ETFS in the coming months as the issuer attempts to become one of the truly global ETF sponsors (iShares has established itself as the dominant player in most markets around the world). Stay tuned…
Disclosure: No positions at time of writing.
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