Dec. 3 -- Three physically-backed base metals Exchange Traded Commodities will be launched this Friday 10 December by ETF Securities Limited. The initial offerings will be of funds holding copper, nickel and tin, with the other LME metals and a basket fund starting next year. The new products will give investors access to industrial metals markets via securities traded on the London Stock Exchange that are directly related to stocks of metals held in LME warehouses. ETF Securities currently has some US$24 billion in assets under management. There is already a large market in ETCs linked to gold and other companies, including JP Morgan and Blackrock Inc., have announced plans to enter the base metals markets.
In a statement ETF Chairman Graham Tuckwell said: "These new products represent an important milestone in the industrial metals market, as they give investors, for the first time, direct access to the physical metals market. We believe these products have been eagerly anticipated by the market and we are pleased to be the firm to provide this breakthrough for investors. We were able to make a similar breakthrough in the precious metals market seven years ago when, in 2003, we pioneered the concept of gold ETCs, which globally have US$97 billion in assets. Investors are increasingly looking at hard assets as a way to hedge against growing concerns about sovereign risk, currency debasement and potential inflation. They are also looking at ways to tap into the rapidly rising commodity demand by China and other emerging market economies. These new products are expected to be of interest to such investors, especially those who much prefer to have their securities backed by physical metal."
The funds will be backed by LME warrant holdings, although in the future metal may be moved off warrant “as assets build up in order to stay within lending guidance and to reduce storage fees.” Deutsche Bank AG, London Branch will act as the metal agent, providing trading, administration and custody services related to the products and the underlying metals. The funds will mirror movements in the LME cash price, less management and storage fees. The three initial funds will have management and insurance charges of 0.69% and 0.12% respectively. The daily storage charge for tin will be 42 cents/tonne.