UBS, under its E-TRACS brand, launched a new exchange-traded note (ETN) yesterday that offers exposure to the DJ-UBS Commodity Index Total Return. This benchmark is designed to provide diversified commodity exposure based on the economic significance of each commodity. The index measures the collateralized returns on a basket of 19 commodity futures contracts representing energy, precious metals, industrial metals, grains, soft commodities, and livestock sectors. The largest commodity allocation is to oil and gas, including crude oil (13.8%), natural gas (11.8%), gasoline (3.7%), and heating oil (3.6%).
Other significant weightings include gold (7.9%), soybeans (7.6%), and the industrial metals – copper at 7.3% and aluminum at 7.0%. The ETN which trades under the symbol DJCI, has an expense ratio of 0.50%, and will rebalance yearly in order to make sure that no single commodity makes up more than 33% of the fund.
DJCI adds to UBS’ diverse offerings in the commodity sector, pushing the total number of ETNs based on commodity indexes to 11.
This ETN will compete directly with the iPath Dow Jones-UBS Commodity Index Total Return ETN (DJP), which also tracks the Dow Jones-UBS Commodity Index Total Return. DJP has a market capitalization of almost $2 billion and an average daily volume of more than 400,000 shares, but at 75 basis points has a significantly higher expense ratio than the new UBS product.
In addition to several commodity-specific funds, there are a number of exchange-traded products linked to various broad-based commodity indexes, including the S&P GSCI Total Return Index (tracked by GSP), the Rogers International Index (linked to RJI), and the CMCI Total Return Index (linked to UCI).
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