AdvisorShares, the ETF issuer from Bethesda, Maryland, has long been a leader in active ETFs. The company has made a name for itself in this space with ultra-popular products like HDGE and HYLD, while it also has been at the forefront of new strategies in the space as well.
For the most part these new techniques have been focused in on the equity and bond markets, but now we may be seeing a few new additions to the commodity world as well. In one of the more unique SEC filings as of late, the company revealed that it was partnering with Treesdale Partners to bring a new suite of four gold ETFs to market (read Gold ETFs: Why Bid Ask Spreads Matter).
While some key details were not released in the initial filing—such as expense ratios—there was plenty of pertinent info for investors to digest in the first SEC release. Below, we highlight some of the key details from the filing, and why these four proposed gold ETFs could offer up a completely new way to play the space:
These four proposed funds all look to go beyond dollar-denominated gold exposure, and give investors a way to access the precious metal with a foreign currency tilt. This will give investors a potentially better way to limit their dollar exposure, or it could also allow for a more nuanced way for investors to play gold across various currencies (read The Guide to Gold ETF Investing).
Additionally, investors should note that the funds will utilize a Dennis Gartman approach, as the filing suggested that Treesdale will be evaluating the gold market constantly and will be relying on information from Gartman’s daily piece ‘The Gartman Letter’ for insight on the space. All will also be structured as ‘fund of funds’ so investors could see an outsized expense ratio thanks to acquired fund fees, although it is hard to say what the total will be at this point in time.
The three targeted funds include gold ETFs that zero-in on specific currencies in both Europe and Asia. These include the yen, pound, and euro, giving investors a way to target gold in these developed market currencies. These funds will, assuming they pass regulatory hurdles, trade under the following names and symbols:
-Gartman Gold/Yen ETF (:GYEN)
-Gartman Gold/British Pound ETF (:GGBP)
-Gartman Gold/Euro ETF (:GEUR)
Beyond these three, arguably the most important of the four will be the broad AdvisorShares International Gold ETF (:GLDE). The fund will primarily utilize the aforementioned three ETFs in its basket, but it can also use various closed-end funds, ETNs, or other ETFs in order to round out exposure as well (read Time to Buy Junior Gold Mining ETFs?).
It will also seek to adjust exposure among the various currencies based on Gartman’s outlook in order to help deliver to investors some level of outperformance. In essence, the fund will cycle among the various currency denominated funds in order to find those that are expected to perform the best, giving a new type of active management to the usually-passive gold space.
The Bottom Line
It is very hard to say how attractive these funds might be to investors if they ever launch. While precious metal investments remain ever-popular, active management is something that the space hasn’t really seen, and currency exposure hasn’t really been a factor at all (read ETFs that We are Thankful For).
The funds also look to have somewhat of an outsized expense ratio so this could pose a problem for investors seeking cheap ways to access the gold market. However, if the foreign currency approach can deliver some outperformance, it isn’t too hard to imagine a little more competition for the likes of IAU, GLD, and SGOL in the already fierce gold ETF space at some point in 2013.
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Follow @Eric Dutram on Twitter
Long IAU and gold bullion.