NEW YORK (
) -- ETF Securities is launching the first U.S.-traded physically-backed platinum and palladium ETFs today.
The highly anticipated
ETFS Physical Platinum Shares
ETFS Physical Palladium Shares
will expand the lineup of popular commodities funds designed to give investors access to the price of precious metals.
, platinum and palladium are unique precious metal holdings that stand to benefit from rapid expansion abroad.
More than half of the supply of palladium and platinum goes into the construction of catalytic converters, which convert harmful gases from auto emissions into less harmful substances. As the rapidly growing markets in China and India begin to develop emissions standards, platinum and palladium will be in high demand.
PPLT and PALL will join the ranks of other popular physically-backed ETF Securities funds. Already trading are the
ETFS Physical Silver Shares
ETFS Physical Swiss Gold Shares
, launched in July and September respectively. If the rapid growth of SIVR and SGOL is any indication of investor interest, PPLT and PALL could quickly attract volume.
While PPLT and PALL are the first U.S.-traded funds to track physical stockpiles of platinum and palladium, other platinum and palladium-tracking securities have already premiered with varying success.
UBS E-TRACS CMCI Long Platinum Total Return ETN
UBS E-TRACS CMCI Short Platinum Excess Return
, and the
Dow Jones-UBS Platinum Subindex Total Return
, all offer investors exposure to platinum prices through derivatives contracts. These funds use platinum futures contracts to give investors exposure to the price of platinum.
These existing platinum products, however, have faced challenges in open market trading. PTM and PTD are volatile funds that use leveraged strategies to track platinum. While PTM has a relatively high average daily trading volume of 85,000 shares, PTD has attracted virtually no investor interest.
PGM, the most popular of the existing platinum ETNs, ran into problems in late 2009 when "safety position limits"
in new share creation. Since the futures market for platinum is relatively small, and the demand for platinum exposure is high, regulators wanted to ensure that the rapid expansion of a fund like PGM would not unduly impact platinum futures prices.
PPLT and PALL will offer platinum exposure without the headache of futures-based funds. While the demand for traditional precious metals like gold and silver is still high, investors are likely to embrace platinum for its high perceived value and industrial applications.
-- Written by Don Dion in Williamstown, Mass.
At the time of publication, Dion did not have holdings in any of the funds mentioned.
Don Dion is president and founder of
, a fee-based investment advisory firm to affluent individuals, families and nonprofit organizations, where he is responsible for setting investment policy, creating custom portfolios and overseeing the performance of client accounts. Founded in 1996 and based in Williamstown, Mass., Dion Money Management manages assets for clients in 49 states and 11 countries. Dion is a licensed attorney in Massachusetts and Maine and has more than 25 years' experience working in the financial markets, having founded and run two publicly traded companies before establishing Dion Money Management.
Dion also is publisher of the Fidelity Independent Adviser family of newsletters, which provides to a broad range of investors his commentary on the financial markets, with a specific emphasis on mutual funds and exchange-traded funds. With more than 100,000 subscribers in the U.S. and 29 other countries, Fidelity Independent Adviser publishes six monthly newsletters and three weekly newsletters. Its flagship publication, Fidelity Independent Adviser, has been published monthly for 11 years and reaches 40,000 subscribers.