2019-08-01_Shares_Magazine

EXCHANGE-TRADED FUNDS

01 August 2019 | SHARES | 31

ƚŽƚŚĞŶĞdžƚŵŽŶƚŚĂŶĚƚŚĞ
ƉĂƩĞƌŶƌĞƉĞĂƚĞĚ͘
ŽŶƚĂŶŐŽƌĞĨĞƌƐƚŽƚŚĞ
ŵĂƌŬĞƚĐŽŶĚŝƟŽŶǁŚĞƌĞďLJƚŚĞ
price of a futures contract in a
ĐŽŵŵŽĚŝƚLJŝƐƚƌĂĚŝŶŐĂďŽǀĞƚŚĞ
ƐƉŽƚƉƌŝĐĞ;ƚŚĞĐƵƌƌĞŶƚŵĂƌŬĞƚ
ƉƌŝĐĞͿ͘dŚĞƌĞƐƵůƟŶŐĨƵƚƵƌĞƐ
͚ĐƵƌǀĞ͛ǁŽƵůĚďĞƵƉǁĂƌĚͲƐůŽƉŝŶŐ
ǁŝƚŚƉƌŝĐĞƐĨŽƌĚĂƚĞƐĨƵƌƚŚĞƌ
ŝŶƚŚĞĨƵƚƵƌĞƚƌĂĚŝŶŐĂƚĞǀĞƌ
ŚŝŐŚĞƌůĞǀĞůƐ͘
ĂĐŬǁĂƌĚĂƟŽŶĚĞƐĐƌŝďĞƐƚŚĞ
ƌĞǀĞƌƐĞʹǁŚĞƌĞĨƵƚƵƌĞƐĂƌĞ
ƚƌĂĚŝŶŐďĞůŽǁƚŚĞƐƉŽƚƉƌŝĐĞ
ʹŽŌĞŶďĞĐĂƵƐĞŽĨƐŚŽƌƚͲƚĞƌŵ
ƟŐŚƚŶĞƐƐŝŶƚŚĞƵŶĚĞƌůLJŝŶŐ
ŵĂƌŬĞƚ͘ƌŐƵĂďůLJĐŽŶƚĂŶŐŽŝƐĂ
ŵŽƌĞŶĂƚƵƌĂůƐƚĂƚĞĂƐŝƚƌĞŇĞĐƚƐ
ĐŽƐƚƐŽĨŽǁŶĞƌƐŚŝƉƐƵĐŚĂƐ
ƐƚŽƌĂŐĞĂŶĚŝŶƐƵƌĂŶĐĞ͘

COST OF THE ROLL
tŚĂƚĚŽĞƐƚŚŝƐŵĞĂŶĨŽƌĂŶ
investor? When contracts
are rolled over to avoid
ƚĂŬŝŶŐĚĞůŝǀĞƌLJŽĨƚŚĞƉŚLJƐŝĐĂů
ĂƐƐĞƚ͕ĐŽŶƚĂŶŐŽƐĞĞƐƌĞƚƵƌŶƐ
ĚŝŵŝŶŝƐŚĞĚ͕ĂůƐŽŬŶŽǁŶĂƐ
͚ŶĞŐĂƟǀĞƌŽůůLJŝĞůĚ͛͘DĞĂŶǁŚŝůĞ͕
ďĂĐŬǁĂƌĚĂƟŽŶƐĞĞƐƌĞƚƵƌŶƐ

ĞŶŚĂŶĐĞĚĚƵĞƚŽƚŚĞ͚ƉŽƐŝƟǀĞ

ƌŽůůLJŝĞůĚ͛͘

dŚĞŝŵƉĂĐƚŽĨĐŽŶƚĂŶŐŽ

ŝƐŵŽƌĞĂĐƵƚĞĨŽƌŝŶǀĞƐƚŽƌƐ

ďĞĐĂƵƐĞƚŚĞƉƌŽǀŝĚĞƌƐŽĨƚŚĞƐĞ

ƉƌŽĚƵĐƚƐĚŽŶŽƚƉĂLJĂƉƌĞŵŝƵŵ

ĞǀĞƌLJŵŽŶƚŚƚŽĐŽǀĞƌƚŚĞĐŽƐƚ

ŽĨƚŚĞ͚ƌŽůů͛ĂŶĚŵĂŝŶƚĂŝŶƚŚĞ

ƐĂŵĞƉŽƐŝƟŽŶ͘

/ŶĞīĞĐƚƚŚĞŝŶƐƚƌƵŵĞŶƚŝƐ

ŐŝǀŝŶŐƵƉĂƉƌŽƉŽƌƟŽŶŽĨŝƚƐ

ƉŽƐŝƟŽŶƚŽĐŽǀĞƌƚŚĞĐŽƐƚŽĨ

ƚŚĞƌŽůůͲŽǀĞƌ͘

tŝƐĚŽŵdƌĞĞƌĞƐĞĂƌĐŚĚŝƌĞĐƚŽƌ

EŝƚĞƐŚ^ŚĂŚƐĂLJƐ͚͗DŽƐƚŝŶĚƵƐƚƌŝĂů

ŵĞƚĂůƐŚĂǀĞĂŇĂƚĨƵƚƵƌĞƐĐƵƌǀĞ

ǁŚŝůĞƉƌĞĐŝŽƵƐŵĞƚĂůƐŚĂǀĞ

ŶĞŐůŝŐŝďůĞŽƌŶŽĐŽŶƚĂŶŐŽŽƌ

ďĂĐŬǁĂƌĚĂƟŽŶ͘ŶĞƌŐLJŵĂƌŬĞƚƐ

ƚĞŶĚƚŽƐĞĞŵŽƌĞƉƌŽŶŽƵŶĐĞĚ

ĐŽŶƚĂŶŐŽŽƌďĂĐŬǁĂƌĚĂƟŽŶ͘

ƵƌƌĞŶƚůLJŽŝůŝƐŝŶďĂĐŬǁĂƌĚĂƟŽŶ

ďƵƚŝƚŚĂĚďĞĞŶŝŶĐŽŶƚĂŶŐŽĨŽƌ

ƐŽŵĞƟŵĞďĞĨŽƌĞƚŚĂƚ͘

͚KƚŚĞƌŵĂƌŬĞƚƐĂƌĞǀĞƌLJ

ƐĞĂƐŽŶĂůƐƵĐŚĂƐŶĂƚƵƌĂůŐĂƐĂŶĚ

ůĞĂŶŚŽŐƐĂŶĚLJŽƵǁŝůůƐĞĞƚŚĂƚ

ƌĞŇĞĐƚĞĚŝŶƚŚĞĨƵƚƵƌĞƐĐƵƌǀĞ͛͘

AN OPTIMISED APPROACH

LJĂĚŽƉƟŶŐĚŝīĞƌĞŶƚƐƚƌĂƚĞŐŝĞƐ͕

ƐŽŵĞƉƌŽĚƵĐƚƐĂŶĚŝŶĚŝĐĞƐ

ƐĞĞŬƚŽƉƌŽǀŝĚĞĂƐŽůƵƟŽŶƚŽ

ƚŚŝƐƉƌŽďůĞŵ͘dŚĞƐĞƐŽͲĐĂůůĞĚ

͚ŽƉƟŵŝƐĞĚƐŽůƵƟŽŶƐ͛ǁŝůů

ƚLJƉŝĐĂůůLJůŽŽŬƚŽďƵLJĂƐĞůĞĐƟŽŶ

ŽĨĚŝīĞƌĞŶƚĨƵƚƵƌĞƐĐŽŶƚƌĂĐƚƐƚŽ

ŵŝƟŐĂƚĞƚŚĞŶĞŐĂƟǀĞŝŵƉĂĐƚŽĨ

ĐŽŶƚĂŶŐŽĂŶĚ͕ŝŶƐŽŵĞĐĂƐĞƐ͕

ŵĂdžŝŵŝƐĞƚŚĞƉŽƐŝƟǀĞŝŵƉĂĐƚŽĨ

ďĂĐŬǁĂƌĚĂƟŽŶ͘

dŚĞƌĞĂƌĞƐĞǀĞƌĂůh<ͲůŝƐƚĞĚ

d&ƐǁŚŝĐŚĨĂůůŝŶƚŽƚŚŝƐĐĂƚĞŐŽƌLJ͘

ŵŽŶŐƚŚĞŵĂƌĞ UBS ETF CMCI

Composite (UC15) ͕ WisdomTree

Enhanced Commodity (WCOG)

and iShares Bloomberg Roll

Select Commodity Swap (ROLL) ͘

tŝƐĚŽŵdƌĞĞ͛Ɛ^ŚĂŚďĞůŝĞǀĞƐ

LJŽƵŶĞĞĚƚŽƚŚŝŶŬĐĂƌĞĨƵůůLJĂďŽƵƚ

ǁŚĂƚLJŽƵĂƌĞďƵLJŝŶŐĂŶĚŶŽƚ

ůŽŽŬƚŽŝŶǀĞƐƚŝŶƚŚĞĐŽŵŵŽĚŝƟĞƐ

ƉƌŽĚƵĐƚǁŝƚŚƚŚĞůŽǁĞƐƚĨĞĞ͘

͚zŽƵĐĂŶ͛ƚũƵƐƚůŽŽŬĂƚƚŚĞŶĂŵĞ͖

LJŽƵƌĞĂůůLJŶĞĞĚƚŽƐƚƵĚLJƚŚĞ

ƉƌŽƐƉĞĐƚƵƐĐĂƌĞĨƵůůLJŝŶŽƌĚĞƌƚŽ

ŵĂŬĞĂŶŝŶĨŽƌŵĞĚĚĞĐŝƐŝŽŶ͛͘

WHICH COMMODITIES COULD GO UP IN PRICE?

A RECENT PIECE of

research by investment

bank Morgan Stanley

identified several bright

spots, namely copper,

palladium and tin.

Morgan Stanley

believes supply issues

could support copper

prices and an example

of an ETF tracking the

base metal price is ETFS

Copper (COPA).

It sees continued

upside in palladium

prices until mid-2020.

Demand currently

outweighs supply,

which is pushing up the

price. Invesco Physical

Palladium (SPAP)

is among the ETFs

tracking the value of

the metal.

In the long term

tin is expected to be

a beneficiary of new

technology development

with the metal widely

used in solders. To quote

consultancy Roskil

it is the metal which

‘glues the technology

revolution’. Exposure is

possible through such

ETFs as ETFS Tin (TINM).

LJ Tom Sieber

ĞƉƵƚLJĚŝƚŽƌ

ŽŵŵŽĚŝƚLJ Yϯϭε Yκϭε YϭϮϬ YϮϮϬ

ŽƉƉĞƌ;ΨͬƚͿ ςϬςϯ ςρϬκ ςςΘϬ ςϳϮκ

WĂůůĂĚŝƵŵ;ΨͬŽnjͿ ϭκϬϬ ϭκρϬ ϭρϬϬ ϭκεϬ

dŝŶ;ΨͬƚͿ ϭεΘκϮ ϮϬεκκ ϮϮϬκς Ϯϯϭκε

COMMODITY FORECASTS

Source: Morgan Stanley