Metals Go Mainstream

In a sign that the once-exclusive commodities markets are increasingly opening their arms to average investors, PowerShares Capital Management and Deutsche Bank on Friday launched seven new commodity-based ETFs on the American Stock Exchange.

The launch is a response to an insatiable appetite for both exchange-traded funds and commodity-linked investments. In 2006, assets in nine then-existing commodity ETFs rose 191%, with total assets of $13.5 billion, according to State Street Global Advisors. The launch also comes at a time when commodities have been volatilie. In fact, over the past few days it's been downright brutal for commodities such as oil and copper.

Nevertheless, "there is definitely demand among both retail and institutional investors for exposure to the commodity markets," says Pavel Molchanov, energy analyst at Raymond James. "These ETFs are a positive development in that they give exposure to the direct commodity arena in a way that's accessible to even small investors."

The new exchange-traded funds are linked to indices that track futures contracts, and are based on the "Optimum Yield" versions of the Deutsche Bank Liquid Commodity Index subindices. This means that when the next-to-expire contract is trading below contracts expiring in later months, the indices try to minimize the negative impact of that. And when it's trading above, they try to take advantage of that.