NEW YORK (
) -- As China and India push forward with plans to cut greenhouse gas emissions, platinum and palladium investors should take special notice.
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.
ETF Securities, a global ETF issuer, has filed to launch a ETFS Palladium Trust. This fund will add to the firm's physically backed ETF lineup in the U.S., which already includes the
ETFS Physical Silver Shares
ETFS Physical Swiss Gold Shares
, launched in July and September respectively. The new palladium fund has been tentatively given the symbol "PALL."
PALL will be the first U.S.-listed, physically backed palladium fund. Physically backed gold and silver funds like
SPDR Gold Shares
iShares Silver Trust
have been tremendously popular amongst U.S. investors. During September, GLD attracted more than $2 billion in assets.
Platinum, which has traditionally competed with gold from a price and value perspective, could be the next trend in ETF investing. While the platinum jewelry market is still relatively small, the metal has a number of industrial applications outside of the auto industry. Palladium is one member of the platinum group of metals. Other metals from this family include ruthenium, rhodium, palladium, osmium, and iridium. Besides platinum, palladium is the most popular of these.
As the Commodities Futures Trading Commission hashes out commodities futures position limits, ETF investors have suffered from uncertainty. As futures-based ETFs, like
United States Natural Gas
PowerShares DB Commodity
, alter their portfolios
, investors may end up with different strategies than they originally bargained for.
Physically backed funds, which track a physical commodity stockpile, offer a less complex approach to commodities investing. After successfully launching physically backed commodities funds in London and Japan, ETF Securities is vying for the American investor.
A physically backed palladium fund can not come soon enough for U.S. investors. Currently, the only exchange traded product to offer exposure to platinum has halted creation of new shares. As
iPath DJ AIG Platinum TR Sub-Idx ETN
adjusts to stay within new CFTC guidelines,
will operate more like a closed-end fund than an exchange traded note.
ETFS' bet on hard assets appears to be
. Although the firm has only been a presence in the United States for two months, the assets under management for its two funds are now exceeding $350 million. Globally, the firm's AUM has reached $16 billion.
Additional futures regulation, emerging market emissions reduction and a booming appetite for commodities funds should all help to make the new palladium offering a success. If offerings in London and Japan are any indication, PALL may be the next fund from ETF Securities, but it won't be the last.
-- Written by Don Dion in Williamstown, Mass.
At the time of publication, Dion does not have any positions in 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.