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12th November 2010, 09:27 AM
JPMorgan Plans Physically-Backed Copper ETF

Innovation throughout the ETF industry has been one of the primary themes of recent years, but perhaps no corner of the market has seen more progress on the product development front than the commodity space. U.S. investors now have the ability to invest in dozens of natural resources, primarily through exchange-traded funds than consist of futures contracts. In addition to an increase in the number of products available, issuers have continued to refine the manner in which exposure is offered by tweaking the rules for rolling holdings and revising index components [see Closer Look At The Third Generation Commodity ETF].

As evidenced by strong cash inflows into commodity ETPs, investors have embraced the ETF wrapper as an efficient means of establishing exposure to an asset class that has the potential to add valuable return enhancement and diversification benefits to traditional stock-and-bond portfolios. But some investors have also expressed frustration over the returns generated by futures-based investment strategies, which will generally exhibit strong correlations to spot prices but may lag behind a hypothetical return on the physical commodity due to costs incurred when “rolling” the underlying futures contracts [see the Many Uses Of Commodity ETFs].

Against this backdrop, JPMorgan recently filed with the SEC plans for a physically-backed copper ETF that would offer investors a way to gain exposure to the widely-used metal without the complexities of a futures-based strategy. The trust formed by JPMorgan would hold “only Copper Grade A in physical form,” and shares would be priced to correspond to the value of 1/100th of a metric tonne of copper.

Currently, there are eight physically-backed commodity funds, including three focused on gold, two on silver, and one each on palladium and platinum. Last week, ETF Securities launched GLTR, which offers exposure to a basket consisting of those four precious metals.

While a physically-backed copper ETF would eliminate the contango-related nuances that can plague existing industrial metal funds, other issues may arise. Because precious metals maintain high value-to-weight ratios, these funds are able to charge relatively low expense ratios (IAU charges just 25 basis points). A physically-backed copper ETF, on the other hand, could potentially spend a material portion of assets storing the underlying holdings. According to the prospectus, the proposed fund would utilize warehouses maintained by Henry Bath Group, a firm that operated a platform of exchange-approved storage warehouses in the United Kingdom, Italy, Singapore, Netherlands, and the U.S.


12th November 2010, 09:29 AM
I agree, I think copper will easily double or triple in price in the next few years.

12th November 2010, 01:10 PM
Just received 125 pounds grade A electrolytic COPPER:
Super-Vutron 600 volt welding cable, size 2/0. 250 foot spool.
( Beats the heck out of sorting pennies )

12th November 2010, 01:33 PM
Just received 125 pounds grade A electrolytic COPPER:
Super-Vutron 600 volt welding cable, size 2/0. 250 foot spool.
( Beats the heck out of sorting pennies )

How much did it cost?

There are 125 pounds of copper (plus 6.5 pounds of zinc) in 19,188 pre-1982 pennies. So that's $192 face value of pennies.