Van Eck Planning Constant Maturity Commodity ETF

by on January 14, 2011 | ETFs Mentioned:

Van Eck, the New York City-based ETF issuer known for its commodity producing equity ETFs, remains active on the product development front, recently announced plans for a constant maturity commodity ETF. In a recent filing with the SEC, the company released details on the Market Vectors CM Commodity Index ETF, which would track the performance of the UBS Bloomberg Constant Maturity Commodity Total Return Index [read the Ultimate Guide To Agricultural ETFs].

The underlying index is a rules-based, composite benchmark diversified across 26 commodities from the following five sectors: energy, precious metals, industrial metals, agriculture and livestock. The index is comprised of futures contracts with maturities ranging from around three months to over three years for each commodity, depending on liquidity. The overall return will reflect a combination of the returns on the futures contracts and the daily fixed-income return that would be earned on a hypothetical portfolio of 91-day U.S. Treasury bills theoretically deposited as margin for the hypothetical positions in the futures contracts comprising the index.

The selection and relative weightings of the components of the proposed fund are designed to reflect the economic significance and market liquidity of each commodity, as determined based on global economic data, consumption data, commodity futures prices, open interest and volume data [read Ten Commodity ETFs Every Investor Should Know But Most Don't].

If approved, the new fund would likely face stiff competition in the increasingly crowded commodity ETF space where new products seemingly debut every month. Among the competitors would be the United States Commodity Index Fund (USCI), which selects a total of 14 holdings from a universe of 26 commodities in total [see a Closer Look At The Third Generation Commodity ETF].

Van Eck is a major player in the commodity space, offering a number of funds that focus on equities of commodity intensive equities. In addition to the broad-based Hard Assets Producers ETF (HAP), the company’s lineup includes ETFs focused on gold miners (GDX, GDXJ), the coal industry (KOL), agribusiness (MOO), and rare earth metals (REMX). The proposed CM Commodity Index ETF would be the first to offer exposure to commodities through futures products.

Earlier this month Van Eck debuted a mutual fund version of the proposed ETF, the Van Eck CM Commodity Index Fund (CMCAX). The recently-launched mutual fund is passive in nature, seeking to replicate the performance of the underlying index [see Mutual Fund To ETF Converter].

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Disclosure: No positions at time of writing.