Are These New ETFs a Good Idea?
A look at proposed exchange-traded funds for hot asset classes.
StreetTracks Gold Shares (GLD), the first exchange-traded fund tracking a commodity, was one of the most successful ETF launches in history. Within weeks of its November 2004 launch it amassed more than $1.5 billion in assets. Is it any wonder that other financial firms are scrambling to introduce their own commodity ETFs?
In fact, ETF purveyors are much like traditional mutual fund companies in that they aren't above launching new funds in asset classes that have enjoyed strong recent performance and have gotten a lot of attention. Not all of the new commodity ETF proposals, which include offerings tracking silver, oil, and the euro, are without merit. In many cases, however, they sacrifice the tax efficiency and transparency of stock ETFs and should be approached with caution.
It'll be a while before these proposed funds see their first trade. (It took the Securities and Exchange Commission nearly two years to approve the first gold ETF.) Nevertheless, here's an early line on some notable new ideas.
Dan Culloton does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.