Inside the MAS ETF | The motley fool
In recent years, ETF assets have soared to $ 1,000 billion and the number of products has exceeded 1,000. Much of the growth in products and assets is attributable to commodity ETFs, investors. having adopted the exchange-traded structure as an effective way to add the benefits of natural resource exposure to their portfolios. In addition to a number of diversified commodities offering exposure to a basket of commodities, there are now a number of resource specific exchange traded commodities products.
The most popular commodity specific funds can be found in the Category Oil and Gas ETFdb, providing exposure to energy resources such as crude oil and natural gas. But there are also targeted ETFs and ETNs that offer exposure to everything from copper to sugar, giving investors a unique set of tools to bet or hedge against changes in commodity prices. One of the most distinctive commodities is the Teucrium corn fund
Under the hood
Commodities traded on an exchange generally fall into one of three categories: physically backed products (such as Gold ETF), term funds and exchange-traded notes (see Guide to investing in commodity ETFs). LE MAS belongs to the second category; an important distinction to make since many products of the ETFdb category on agricultural commodities are structured like ETNs.
The way in which the MAS manages to make itself known is somewhat unique. Most futures, including the ultra-popular United States Natural Gas Fund
The MAS is designed to reflect the daily percentage changes of a weighted average for three corn futures contracts: 35% weight for the second expiring contract, 30% weight for the third expiration contract, and weighting 35% for the contract expiring in December following the expiration of the third expiring contract. Thus, the MAS does not “roll” all of its holdings each month, potentially reducing the impact of the carry over on prices when the futures curve is rising.
The unique exhibition offered by the MAS has a price; the management fee is 1%, but the “all-in” expense ratio – including commissions incurred in trading futures contracts and other fees – is estimated at 1.71%, among the most expensive in the world. sector.
Corn ETF price factors
Since MAS is exposed to prices through futures, it is important to note that changes in stock prices depend not only on changes in the spot price of corn, but also on the ‘roll return’ incurred. or obtained when expiring contracts are sold and longer term. contracts are bought. Several factors influence the price of corn, including:
- Growing conditions: The prices of maize, like most agricultural products, depend on growing conditions in regions of the world which account for a large part of the supply. Corn is the largest crop in the United States in terms of value and volume, along with Iowa, Illinois, Nebraska and Minnesota representing more than half of the country’s production. In total, the United States produced nearly 40% of global corn production in fiscal 2009, producing over 300 million metric tonnes. The other major producers are China (165 million metric tonnes) and Brazil (50 million tonnes).
- Ethanol request: Maize is different from most agricultural products in that industrial activities represent a large part of the demand. Corn is a main ingredient in ethanol, a biomass that has established itself as an alternative to gasoline and petroleum in recent years. As the demand for ethanol increases, competition for corn will increase and prices generally increase.
- Crude Oil Price: Because corn has become an increasingly viable substitute for crude oil – thanks to the boom in the ethanol industry – prices can be influenced by the level of the crude oil market. If oil prices remain at high levels, demand for alternative fuels increases, causing corn prices to rise as well.
- Inflation: Many investors view exposure to agricultural commodities as protection against rising prices; When an inflationary environment sets in, food prices are often among the first to rise (see Beyond advice: ten ETFs to hedge against inflation).
Alternative ETF options
Although CORN is the only ETF to offer pure corn exposure, there are a number of funds that include corn:
- PowerShares DB Agricultural Fund
(NYSE: DBA): Corn makes up about 12.5% of this fund, which also includes soybeans, sugar and a handful of other products.
- iPath Dow Jones-UBS Grains ETN
(NYSE: JJG): Corn futures represent approximately 32% of the index to which this ETN is linked; the rest is divided between soybeans and wheat.
- E-TRACS UBS Bloomberg CMCI Alimentaire ETN
(NYSE: FUD): Maize accounts for almost 20% of this aptly named ETN; among the other 11 farms are sugar, coffee and cattle.
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