|Source Introduces Brent Crude Oil ETC|
|09 May, 2012|
Source has expanded its crude oil offering with the launch of a new exchange-traded commodity offering exposure to Brent crude oil.
The issuer’s other crude oil ETCs track broad crude oil indices, and it said the move to focus specifically on Brent was driven by both investor demand and the growing importance of the asset class during recent times.
In the past, West Texas Intermediate was seen as the major benchmark for the global oil market, but it has been losing ground to Brent since last year, when tensions in the Middle East and supply issues saw the two types of oil switch places on the leader board. In February, ETF Securities also expanded its Brent crude ETC range, citing similar reasons.
“Political situations, oil inventories and infrastructure issues on the two sides of the Atlantic can be starkly different,” said Ted Hood, CEO of Source. “Investors increasingly want exposure to a specific oil contract—Brent or WTI—rather than generic crude oil exposure.”
The Source Brent Crude Enhanced T-ETC tracks the S&P GSCI Brent Crude Enhanced Total Return index, which uses a dynamic roll methodology to mitigate the potential effects of contango. Rather than following the rules of conventional commodity indices and rolling from one short-term futures contract to the next, which can lead to a lag in spot prices during periods of contango, the index switches to longer-term futures contracts when the market is in contango.
The ETC uses physical replication with a swap overlay and is secured with US Treasury bills and cash. It is listed on the SIX Swiss Exchange and trades in US dollars.
It has a management fee of 0.49 percent, but there is also a swap fee of 0.60 percent.