As I'll be spending most of the day at the Superbowl of Indexing talking about ETFs, a short post about a new fund might be warranted.On Friday ETF Securities debuted the ETFS Physical White Metal Basket Shares (WITE) which equally weights silver, platinum and palladium. WITE comes on the heels of the recently listed GLTR fund which equally weights the same three plus gold. It seems to me that WITE offers more utility than GLTR despite having less diversification.
The idea here is that gold has far more psychological value with just about no industrial considerations. The other precious metals obviously have industrial uses which makes them less predictable in the face of some sort of external shock. As a reminder my primary motive in owning gold across the board is the expectation that in the face of some sort of external shock it will go up. Obviously it has gone up for other reasons over the last few years as well. A long time ago in this context I said that I don't root for gold to do well because if it is the best performer you own then chances are stocks aren't doing very well which is about right for the last few years.
With GLTR it seems like gold doesn't get enough weight in the fund. I like the idea of access to the other metals without picking between the three but having the opportunity to give gold a larger weight in the portfolio over the white metals. Gold is much easier to buy and keep because it is not any sort of proxy for economic activity.
Zooming out a little there have been a lot of new funds to come out in the last few months (this statement is always true, isn't it?) and I can see working in ETFs into parts of the portfolio that I had not thought of before but this is becoming important for accessing narrow spaces in foreign markets that for now are not very liquid with individual stocks which is obviously a focus of mine.
It is pretty amusing to me that I stumbled onto something good with the Chinese tollroads but frustrating that the volume is not enough to accommodate our rather small client base. There are other names as well where this is the case and the reason to bring this up is that you as an individual do not have the same sort of liquidity constraints and these companies can be understood and analyzed if you can give it adequate time.
4 comments:
Wow, superbowl of indexing at the Space Age Lodge! I never imagined Gila Bend, AZ as a convention destination. Who knew?
Roger,
Do you follow the Viet Nam market at all? VNM has been on fire. Up 14% in just the last 5 days. Maybe Viet Nam is finally moving from a frontier market to an emerging market.
When I study a mutual fund I want to know about the manager. Do you pay any attention to the management of new ETFs? Even if it is an index tracking ETF someone is making choices to try and track that index.
WH, Gila Bend is huge now :-)
I doubt the issues in Vietnam are now resolved. This is a small market and can be prone to buying panics as it has been prone to selling panics too.
Don, if you mean qualitative choices then you are incorrect, there are no qualitative decisions in passive indexes only rules based decisions that are consistent with the prospectus.
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